RBA Warns Rate Risk Isn't Over as Supply Shocks Mount

The RBA's chief economist says global supply shocks are becoming more frequent — keeping rate cut hopes firmly on hold heading into August.

For anyone hoping the Reserve Bank of Australia would soon start cutting rates, the RBA's chief economist delivered a sobering message in Canberra this week: the risks are not going away, and in some respects they are getting structurally worse.

ABC News reports that RBA chief economist Sarah Hunter delivered a speech to the Economic Society of Australia on Wednesday, warning that global supply shocks are occurring more frequently and that the RBA will need to adapt its entire policy framework to navigate the new environment.

What Dr Hunter actually said

Speaking in Canberra, Dr Hunter said the central bank's monetary policy approach is under genuine pressure from an increasingly volatile global environment.

"These sharp adverse supply shocks have become more frequent, meaning the Monetary Policy Board and the RBA have had to navigate the policy trade-offs repeatedly," Dr Hunter said. "And we could see this continue going forward; economic spill-overs from rising geopolitical tensions, trade fragmentation, and the increasing prevalence of extreme climate events are just some of the shocks we are now experiencing. That means the RBA, and the economy more broadly, may have to face these trade-offs, and the costs that come with them, more often in the years ahead."

The timing of her speech added weight to the concern. Within hours of Dr Hunter's remarks in Canberra, the United States launched fresh missile strikes against Iran, in the latest exchange between the two countries threatening to choke off shipping traffic through the Strait of Hormuz. Oil supply disruptions of that kind flow into transport costs and then into consumer prices — exactly the type of imported inflation that makes the RBA's job harder.

Dr Hunter outlined the conventional approach to supply shocks: look through short-term price spikes if the shock appears temporary. But she flagged clearly that this approach breaks down when a shock is expected to be more persistent, or when it creates a greater risk that inflation expectations shift higher. In those cases, the central bank would need to respond by raising interest rates.

She described the past 18 months as "challenging" for the RBA, citing the United States' "Liberation Day" tariffs announced in April 2025 — which ultimately proved less disruptive than feared, with global trade proving "much more resilient" — and the current Middle East conflict, which she acknowledged was not widely anticipated. "I'm not sure anybody had their money on — well maybe some people, but not many people — had their money on a war in the Middle East," she said. "That's obviously had implications which have further compounded where we were starting from."

The RBA has poured significant resources into understanding the new landscape. Dr Hunter said the bank had "consciously poured more resources into understanding what a world of increasing supply shocks may look like for inflation targeting central banks," launching new initiatives to engage with academia and think tanks. The RBA's 2026 Annual Conference will focus specifically on the topic of monetary policy trade-offs.

What it means for your mortgage rate

The RBA's next Monetary Policy Board meeting is scheduled for August 10-11. That is the next significant checkpoint for Australian borrowers watching for any movement in the cash rate.

Dr Hunter's comments are not a policy signal in themselves, but the overall picture they paint is not one that points toward imminent rate cuts. She explicitly did not rule out further rate increases, flagging that if supply shocks prove persistent and inflation expectations shift higher, the Monetary Policy Board would need to respond. That is a meaningful statement at a time when many borrowers had been banking on no further increases.

"When you've got this sort of volatility and uncertainty it's difficult for any framework to navigate through, because innately things are moving that you can't predict," Dr Hunter said. She also highlighted the AI data centre investment boom as an example of the new unexpected variables the RBA is having to track in real time — "quite hard when something is very new like that," she said of the AI infrastructure surge, which has been "spectacular in the sense that it had been so large and quick."

Planning your finances in an uncertain rate environment

For borrowers on variable rates, the message from Dr Hunter's speech is clear: do not plan your budget around rate cuts arriving soon. Build your financial position around the possibility that your rate stays where it is — or moves slightly higher — before any reduction emerges.

If you have not already compared your current rate against what is available in the market, that is worth doing now. Many lenders have applied rate changes unevenly across their product ranges, which means there can be genuine savings available through refinancing even in a flat or rising rate environment. A refinance savings calculation takes only a few minutes and often reveals more than borrowers expect.

For borrowers considering how much to borrow or whether to lock in a fixed rate, Dr Hunter's longer-term framing is the most important signal from this speech. She is not just describing the next board meeting — she is describing a fundamental shift in how the Australian economy, and the RBA's responses to it, will function for years ahead. Uncertainty is structurally higher than it used to be. Building in a financial buffer above the minimum serviceability threshold is not overcautious in this environment.

If you want to understand how changes in the cash rate affect your repayments in practice, a repayment calculator can model different rate scenarios before you commit. And if you are planning to buy in the near term, running a current borrowing power estimate under stressed rate conditions is a sound first step for any conversation with a broker.