Deputy Governor Andrew Hauser has been unusually direct about what the RBA is asking of the economy: a stretch of slower growth to bring Inflation down, with a cost that falls in part on workers.

"We need a period of below-trend growth to bring inflation down, and we're seeing that happening."

That sentence, from Deputy Governor Andrew Hauser at a Citi conference fireside chat in Sydney on 21 October 2026, is about as plain a statement of Central Bank strategy as Australians are likely to hear. Less than a fortnight later, on 3 November, the Monetary Policy Board lifted the cash rate target by 25 basis points to 4.85%, the fifth increase of the year.

The November 2026 Statement on Monetary Policy (SMP), released the same afternoon, puts numbers on the strategy Hauser described. It also shows who is likely to bear the cost.

What "below trend" means in the forecasts

Trend growth is, broadly, the pace at which an economy can expand over time without generating extra inflation pressure. Growing below it means Demand eases relative to the economy's capacity.

The SMP is explicit: "Tighter monetary policy alongside a weaker outlook for the housing market is expected to keep GDP growth below trend." Its year-ended GDP growth forecasts are 1.6% in December 2026, 1.6% in June 2027, 1.3% in December 2027 and 1.3% in June 2028, before edging up to 1.5% in December 2028. The forecasts for December 2027 onwards are lower than in August.

The SMP also judges that "The economy is currently operating with excess demand and is judged to reach balance next year". On the RBA's reading, slower growth is the mechanism that closes that gap.

Hauser flagged one reason the bar for non-inflationary growth may be lower than thought: the RBA has cut its assumption for underlying productivity growth from 1% to 0.7%. A lower productivity assumption implies the economy has less room to grow before capacity pressures build.

The cost that comes with it

The flip side of slower growth is a softer labour market. The SMP forecasts Unemployment rising from 4.4% in June 2026 to 4.8% by June 2027 and 5.1% by December 2028, each period above the August projections from late 2026 onwards. These are forecasts, conditional on assumptions such as a cash rate path drawn from market pricing as at 28 October.

Hauser did not dress this up. "No lost Job is one to celebrate," he said.

That line matters because it acknowledges the tension openly. The RBA's strategy relies on demand cooling, and a cooler labour market means more people looking for work. The Board's statement on 3 November confirmed that "the unemployment rate is projected to rise by more than expected in the August forecasts".

Other households are feeling the squeeze through different channels. Hauser noted that about 2% of mortgages were in negative cash flow, while the median mortgagee held more than a year of buffers. By comparison, about 15% of renters were in negative cash flow. Those figures predate the latest increase.

Why the RBA judges the trade-off worth making

Hauser's case rests on inflation and, above all, inflation expectations. "The inflation outlook looks materially worse than we projected in the August report," he said in October. He pointed to oil above $100 a barrel, about a third higher than the August assumption.

He also highlighted a rising share of firms seeing 3–3.5% inflation as the "new normal", and warned: "We can't allow expectations to shift away from the target."

The November SMP backs up that worry. It forecasts headline CPI inflation of 4.5% at December 2026, up from 3.6% in August, and trimmed mean inflation, the RBA's underlying measure, of 3.6%, up from 3.3%. The Board's statement noted that inflation is not expected to reach the top of the 2–3% target range until late 2027, about three quarters later than previously forecast, and that "there is an increasing risk that higher inflation expectations will become embedded."

Current readings are well above target too. Monthly headline CPI was 4.3% in year-ended terms in September, while trimmed mean inflation was 3.7% over the year to the September quarter.

The argument, in short, is that a period of weaker growth and somewhat higher unemployment now is the price of avoiding a longer bout of high inflation, which would itself erode real incomes. As Assistant Governor (Economic) Sarah Hunter put it in an interview on 25 October: "We don't want to live with high inflation for a long time."

Not alone, and not a sharp stop

Hauser has also placed Australia's tightening in a global context. "We were the first G20 central bank, as you know, to raise rates this year," he said, adding that fourteen other G20 central banks have also raised rates.

He has stressed that the case for rate rises still needs to be made publicly. "We do need to keep working on the very basic point that higher interest rates actually bring inflation down," he said. He noted that some RBA models attribute up to two-thirds of the effect of interest rates to the exchange-rate channel, a reminder that policy works through several routes, not only through household Mortgage repayments.

Senior officials have drawn a line between a managed slowdown and a deliberate downturn. Hunter said: "We're not trying to achieve a sharp stop or a really big downturn or anything like that." She added that on recession, "We don't see any signs of that yet in any of the data that we track."

The Board itself was divided on 3 November. Six members voted to raise the cash rate to 4.85%, while three preferred to hold at 4.60%. That split suggests members weighed the trade-off Hauser described differently, even if a majority judged that a further increase was needed.

The bottom line

Hauser's message is that slower growth is not a side effect of the RBA's strategy but central to it. The November forecasts show GDP growth below trend and unemployment rising to 5.1% by late 2028, alongside inflation gradually returning towards target. The RBA argues this is preferable to letting high inflation and rising expectations take root.

For workers, that trade-off is uncomfortable, and senior officials have acknowledged as much. The next test comes at the Board's meeting on 8 December 2026. Readers thinking about how slower growth might affect their household finances can consider speaking with a licensed adviser or their lender.