Key Highlights

  • GDP growth has slowed this year to a little below its potential growth rate.
  • Year-ended growth is forecast at 1.6% in December 2026.
  • It is forecast to ease to 1.3% by December 2027.
  • The rise in Unemployment largely reflected higher-than-expected labour supply.

The Reserve Bank's November forecasts trace a cooling in annual GDP growth through 2027, a path that sits alongside higher interest rates and a gradually rising unemployment rate.

Most of the attention after the Reserve Bank of Australia's (RBA's) 3 November decision has focused on Inflation and the cash rate target, now 4.85 per cent. But the November 2026 Statement on Monetary Policy (SMP) also contains a quieter set of numbers that describe what the RBA expects to happen to the broader economy. Those growth forecasts show annual GDP growth easing from 2.1 per cent over the year to June 2026 to 1.3 per cent by December 2027.

The RBA does not set a target for economic growth, and nothing in its November material says it is aiming for a particular growth rate. What is clear, though, is that the Board judged tighter financial conditions were warranted to bring inflation down, and slower Demand is one of the channels through which higher interest rates typically work.

The growth path in numbers

The RBA's November forecasts, finalised on 28 October 2026, show year-ended GDP growth as follows, with the August SMP forecast in brackets:

  • June 2026: 2.1 per cent (1.9)
  • December 2026: 1.6 per cent (1.4)
  • June 2027: 1.6 per cent (1.5)
  • December 2027: 1.3 per cent (1.6)
  • June 2028: 1.3 per cent (1.6)
  • December 2028: 1.5 per cent (1.8)

Two things stand out. First, the near-term numbers have actually been revised up slightly: the figure for the year to June 2026 is shown as 2.1 per cent, compared with 1.9 per cent in the August Statement, and the December 2026 and June 2027 forecasts are a little higher too. Second, the outlook from late 2027 onward has been revised down, by 0.3 percentage points in each of the last three periods.

So the slowdown is not a story of a sudden drop. It is a gradual step down, from just over 2 per cent to 1.6 per cent and then to 1.3 per cent, with only a modest recovery to 1.5 per cent by the end of 2028.

What is already happening

The RBA's Economic Conditions chapter describes the starting point. It says GDP growth "has slowed this year to a little below its potential growth rate". In plain terms, potential growth is the pace at which an economy can expand over time without generating extra inflationary pressure. Growing a little below that rate implies spare capacity is slowly opening up.

Other parts of the SMP Fill in the picture. The Economic Conditions chapter notes that "Housing prices have declined further from their peak in March". The Financial Conditions chapter says "housing prices have declined by more than expected", while Business Credit growth remains very encouraging. Australian Government Bond yields have increased since the August Statement and are "around their highest levels in many years".

Taken together, these describe an economy in which some areas are cooling noticeably while others remain robust. The RBA characterises overall financial conditions as "restrictive, but with various cross-currents".

Why slower growth sits alongside higher rates

The Monetary Policy Board's statement explained the November increase this way: "the Board judged that a further tightening in financial conditions is warranted". Tighter financial conditions, such as higher borrowing costs and higher bond yields, tend to restrain spending and Investment over time, which in turn eases pressure on prices.

Governor Michele Bullock acknowledged the cost at her 3 November media conference: "Some pain now will prevent even worse pain down the track." She also set out the priority clearly: "Returning inflation to target is our priority, and we will do what is necessary to achieve that."

The forecasts reflect that trade-off. Inflation is forecast to stay elevated for some time, with the Overview noting both headline and trimmed mean inflation are "expected to remain above 3 per cent until end-2027". Growth, meanwhile, slows over the same period.

The labour market link

Slower growth usually shows up eventually in the jobs market, and the RBA's forecasts follow that pattern. The unemployment rate averaged 4.6 per cent in the September 2026 quarter, which the Overview describes as a rise "by more than expected". The forecasts show it climbing steadily from there:

  • December 2026: 4.7 per cent
  • June 2027: 4.8 per cent
  • December 2027: 4.9 per cent
  • June 2028: 5.0 per cent
  • December 2028: 5.1 per cent

The Overview summarises: "The unemployment rate is forecast to rise to a bit over 5 per cent by end-2028."

It is worth noting a nuance in the recent data. The Economic Conditions chapter says "employment growth held up in the September quarter as expected", and the rise in unemployment largely reflected higher-than-expected labour supply. In other words, the latest increase in the jobless rate was driven more by more people looking for work than by Job losses.

Assumptions behind the chart

The growth forecasts rest on assumptions that could change. The cash rate path used is drawn from market pricing as at 28 October, and the Outlook describes it as one that "increases by 35 basis points by mid-2027, before declining a little to stabilise at 4.8 per cent in 2028." The oil price assumption has been lifted substantially, with the December quarter price "35 per cent higher than assumed in August". The trade-weighted index is assumed at 65.2 for 2026 and 65.3 from 2026/27.

If any of these inputs move materially, so could the growth path. The next cash rate decision is at 2.30 pm on 8 December 2026, with the minutes of the November meeting due on 17 November.

The bottom line

The RBA's November forecasts show annual GDP growth easing from 2.1 per cent in the year to June 2026 to 1.3 per cent by December 2027, before a slight lift to 1.5 per cent by the end of 2028. The economy is already growing a little below its potential rate, housing prices have fallen more than expected, and unemployment is forecast to rise to a bit over 5 per cent. The RBA does not target growth, but its forecasts make clear that a slower economy is expected to accompany its effort to bring inflation sustainably back to target.