Key Highlights

  • Hunter said the RBA does not see any signs of recession yet in any of the data it tracks.
  • The Governor said household spending growth is moderating only gradually, business investment has picked up and the labour market appears slightly tighter than previously judged.
  • The Financial Stability Review's severe scenario is a stress test, not a forecast.

Asked directly about recession risk, the Reserve Bank's Assistant Governor (Economic) said nothing in the data points that way so far, while stressing the Bank is not seeking a sharp downturn.

Four rate rises in a year, falling house prices in most capitals and an unemployment rate that has drifted up: it is not hard to see why the word "recession" surfaces in conversations about the Australian economy. Sarah Hunter, the Reserve Bank's Assistant Governor (Economic), was asked about it on 60 Minutes, in an interview recorded on 21 October and broadcast on 25 October 2026.

Her answer was brief and specific: "We don't see any signs of that yet in any of the data that we track."

The phrasing is worth reading carefully. It is a statement about the evidence the RBA has in hand, not a promise about the future. It also sits alongside another line from the same interview that frames the Bank's intentions: "We're not trying to achieve a sharp stop or a really big downturn or anything like that."

What the data the RBA tracks are showing

The RBA's most recent public assessments give a sense of what Ms Hunter may have had in view. The Monetary Policy Board's statement of 29 September said that growth in output had slowed but, at the margin, exceeded expectations in the June quarter. It also noted that "Labour market conditions have eased broadly as expected in recent months".

Governor Michele Bullock added detail in her opening statement to the Senate Economics Legislation Committee on 28 October:

  • Household spending growth is moderating only gradually.
  • Business investment has picked up, mainly in data centres and renewable energy.
  • The unemployment rate recently rose "a little more than we had expected", yet the labour market appears slightly tighter than previously judged.
  • The share of the population with a job remains high.

Those are not the hallmarks of an economy in freefall. At the same time, they describe an economy that is slowing at the edges as tighter financial conditions take hold.

The labour market: rising unemployment, still tight

Unemployment is often the clearest signal of recession, so it is worth looking at what the RBA has said. At her 29 September media conference, Governor Bullock said "the unemployment rate has risen from 3.5 per cent over the past couple of years to 4.6 per cent". She added that "the unemployment rate is still quite low historically," and "we still think the labour market is a little bit tight."

A tight labour market alongside slowing growth is part of why the RBA's assessment is nuanced. The Governor told senators that low productivity growth means the economy cannot grow rapidly without adding to inflation pressure. In that setting, slower growth is not necessarily a warning sign; it can be part of bringing demand back into line with what the economy can sustainably supply.

Ms Hunter described the RBA's two challenges in exactly those terms: an overseas oil shock, and excess domestic demand relative to sustainable supply.

Recession risk in the financial stability scenarios

The RBA does consider severe downturns, but in the context of stress testing. Its October 2026 Financial Stability Review, released on 1 October, modelled a severe scenario in which unemployment reached 6.3 per cent, house prices fell 20 per cent, the cash rate rose to 5.6 per cent, inflation reached 7 per cent and GDP fell 1.4 per cent.

Even in that scenario, the share of mortgagors in cash-flow shortfall rises to about 5 per cent, and borrowers facing a shortfall together with low savings and negative equity make up under 1 per cent. The Review concluded that "Australian banks are well positioned to continue lending, even in a downturn".

That scenario is a hypothetical designed to test resilience. It is not a forecast, and the RBA does not present it as one. The Review's headline assessment was that "the Australian financial system remains resilient, but there's no room for complacency," and that "The principal risks are increasingly coming from abroad."

Business insolvencies, the Review noted, are around their longer-run average, although elevated in hospitality, construction and transport.

The trade-off the Board is managing

The recession question cannot be separated from inflation, because that is what the Board is targeting. The Australian Bureau of Statistics reported on 28 October that headline CPI rose 4.3 per cent in the 12 months to September 2026, up from 4.0 per cent in August, with trimmed mean inflation, the underlying measure, at 3.6 per cent. The RBA's target is 2–3 per cent, with the 2.5 per cent midpoint as reference.

The Governor told senators the aim is to return inflation to that range while keeping some flexibility on timing to balance full employment. She also said: "High inflation hurts everyone." And: "But we can't allow high inflation to persist."

Ms Hunter made the case that the costs of acting now are lower than the alternative. "We don't want to live with high inflation for a long time," she said. On interest rates as a tool: "It's not pain-free, it's not costless, but the cost of it is less using interest rates than it would be using other tools."

She declined to signal the next decision, and said oil-driven price pressure means things will get "a little bit" worse before they improve. The Board's September guidance remains that it is open to "increasing the cash rate target further if needed". The 3 November decision has not been made.

The bottom line

Sarah Hunter's answer on recession was clear about the present: "We don't see any signs of that yet in any of the data that we track." The data the RBA has published point to slowing but still positive momentum, a labour market the Bank still calls a little tight, business investment that has picked up and a resilient financial system. The word "yet" is a reminder that the outlook is uncertain, and the Board's next assessment, including fresh forecasts in the Statement on Monetary Policy, arrives at 2.30 pm (AEDT) on 3 November.