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The Reserve Bank decides on Tuesday 3 November — Melbourne Cup Day. Five AI economist personas weigh the latest inflation, jobs and trade data, and say what they would do.
The September CPI, released on 28 October, was the last big number the Board sees before it meets. It came in hot: headline inflation of 4.3% (economists expected 4.2%), a 0.8% jump in the month, and underlying prices up 1.0% over the quarter. A week earlier, Deputy Governor Andrew Hauser had warned that the inflation outlook had deteriorated well beyond what the RBA forecast in August. Money markets now put the chance of a hike at roughly 80%, up from around 10% on 15 October. On balance, we agree with them.
The statement’s wording (does it keep a tightening bias?), the vote, the RBA’s new forecasts released alongside the decision, and Governor Bullock’s 3:30pm press conference. Even if Tuesday delivers a hike, forecasters are split on what comes next: BetaShares’ chief economist expects a pause in December.
Our call is an AI-assisted reading of public data. It is not a forecast to rely on, and not financial advice.
Where each indicator stands, and which way it pushes the decision.
Net read: four indicators lean toward a hike, one toward a hold, one is neutral.
Approximate market-implied probability of a 25bp hike on 3 November, as reported by LSEG, Bloomberg and Reuters. Different sources round differently.
Scottish philosopher (1723–1790), author of The Wealth of Nations. Pioneered the idea that markets self-regulate through the "invisible hand" — provided money keeps its value.
A currency is a promise, and this one is being quietly broken. Prices are rising at 4.3%, and the Bank’s own business contacts tell it that firms are starting to treat inflation of three or three-and-a-half per cent as normal. Once people expect their money to lose value, they act on it: they raise prices first and ask questions later. A hold on Tuesday would tell every shopkeeper and wage-bargainer that the Bank’s resolve has limits. A modest rise is the cheapest lesson in sound money it can give. The jobs figures trouble me, but unsound money is the crueller master in the end.
British economist (1883–1946) whose General Theory transformed how governments respond to recession, arguing policy should actively smooth the business cycle rather than wait for markets to self-correct.
Look at where this inflation comes from. Oil is dearer and so is imported technology, and no interest rate has ever put a barrel of oil back in the ground. Meanwhile the part of the economy the Bank can touch is already softening: unemployment is 4.7%, the highest since 2021, 39,300 jobs were lost in September, and CommBank sees growth slowing toward 1.5% by year’s end. I grant that underlying inflation at 3.6% shows it is not all oil. But four increases are still working through household budgets, and to raise again against a supply shock is to ask the unemployed to pay for the price of fuel. Hold, say plainly that the door is open, and decide again in December.
A fictional persona in the pragmatic, credibility-focused tradition of modern inflation-targeting central banking — shaped by decades of crisis-era monetary policy experience.
Underlying inflation was my worry in September, and it has not gone away. Headline inflation is 4.3%, underlying prices rose 1.0% in the quarter, and the annual underlying rate has not come down from about 3.6%. The Board has said it will go further if needed, and its Deputy Governor has told us the outlook is markedly worse than the August forecasts. If the Bank stands still on Tuesday, markets will read it as walking back its own words, in a month when expectations are already drifting. Credibility is far cheaper to keep than to rebuild. Hike 25, and use the press conference to say clearly that the aim is to anchor expectations, not to promise more.
A fictional persona in the empirical, labour-market-focused tradition — sceptical of crowded consensus forecasts and focused on what real-time data shows rather than the prevailing narrative.
In September I argued for patience and said the data would tell us whether the earlier hikes were working. It has now told us, and I am obliged to update. Headline inflation beat forecasts at 4.3%, prices rose 0.8% in the month, and the Bank’s business contacts report firms passing on costs faster. The jobs market is cooling just as hoped (part-time hours fell 1.5%), which crowd forecasts tend to underrate. But the costs of being wrong are lopsided: a hold that proves mistaken forces a bigger move later, while a 25-point hike that proves unnecessary can be reversed. So I move to a hike, though I would put the chance of a hold at one in five.
A fictional persona in the structural-economics tradition — focused on Australia's terms of trade, resource dependence, and the long-run cost of global energy shocks on the domestic price level.
Australia is being hit from two directions at once: an energy shock out of the Middle East, and an AI-driven investment boom — data centres built here, pricier technology bought abroad — that bids up costs long before it lifts output. A higher cash rate fixes neither. What it can do is stop firms and workers building those one-off hits into the permanent price level, and with fuel prices still driving the monthly CPI, the risk of second-round effects is real. So I would hike. But I would be honest with borrowers that a fifth rise buys time rather than a solution. The lasting fix is cheaper, more secure energy, more homes built for less, and faster productivity growth. More on that below.
The panel splits 4–1 for a 25 basis point hike to 4.85%. That puts it alongside ANZ and Westpac, who both forecast a November hike, and with markets at roughly 80%. It is more hawkish than CBA and NAB, whose base case going into this week’s data was a hold. CBA had said the risks lean firmly toward a hike, and both may have updated since the print, so check their latest notes.
The interesting movement is inside the panel. Dr Cheng, who argued for a hold in September, has changed her mind on the data. Keynes is the lone dissenter, and his case is the one worth taking seriously: much of this inflation is a supply-side shock that rate rises cannot fix, landing on a jobs market that is already loosening.
Westpac’s 23 October note said that if the quarterly trimmed mean printed near 0.9%, a hike was likely. It printed 1.0%.
A rate rise is a blunt tool. It works by cooling demand — fewer loans, less spending, a softer jobs market — until prices stop climbing so fast. It cannot drill for oil, build a home or make a worker produce more in an hour. So economists keep coming back to three questions: does the energy shock fade, do businesses and households stop expecting 3% or more inflation as normal, and does productivity start growing again?
Unit labour costs — what it costs businesses in wages to produce each unit of output — are the engine room of domestic inflation. Roughly, they rise by wage growth minus productivity growth. Right now productivity is going backwards (down 0.2% over the year to June) and unit labour costs are rising 3.6% a year. To get back to about 2.5%, 1.1 percentage points has to come from somewhere. There are three ways to find it.
| Route | Wage growth | Productivity | Unit labour costs | What it takes |
|---|---|---|---|---|
| Productivity does the work | ~3.5% | +1.0% | ~2.5% | Workers keep real pay rises and nobody has to lose a job. The best outcome and the hardest to deliver. |
| Slack does the work | ~2.5% | 0% | ~2.5% | Wage growth has to slow, which means a weaker jobs market. This is the route higher interest rates push us down. |
| A bit of both | ~3.0% | +0.5% | ~2.5% | The most realistic path: some productivity gain, some cooling. |
Simplified arithmetic to illustrate the trade-off. It is not a forecast.
Housing is the biggest driver of inflation, up 5.2% over the year. Construction is widely cited as a weak spot for productivity, and planning approvals, materials and skills shortages matter as much as interest rates.
Fuel and electricity are at the heart of this shock. Cheaper, more reliable supply lowers prices directly and cuts our exposure to the next Middle East flare-up.
Hauser says the AI boom is currently adding to inflation through data-centre construction and pricier tech. The productivity gain only arrives when businesses actually adopt the tools, and that is a lag of years, not months.
With the underlying trend the weakest in 60 years, competition, easier job-to-job movement and getting skilled workers into the highest-value roles all lift output per hour.
Since 2014, market-sector productivity has grown 7.5% while non-market sectors (health, education, government) have slipped 2.5%. As those sectors employ more of us, their output per hour matters more.
So when might cuts arrive? Earlier this year, the big four’s economists were pencilling in first cuts somewhere between the second and third quarters of 2027. Those forecasts predate September’s hike and this week’s CPI, so we would treat them as the earliest plausible timing, not the base case. Westpac has also noted the RBA is likely to be cautious about cutting, because inflation rebounded soon after the 2025 cuts.
At today’s variable rates, this year’s four hikes have added roughly $378 a month to repayments on a $600,000 loan (about $630 on $1 million). A fifth would add about $97 and $162 more. This is general information, not advice, but if you haven’t looked at your rate this year, it costs nothing to compare.
See the monthly repayment impact of a 0.25% or 0.50% move, up or down, at today’s lowest variable rate. Tuesday’s most likely move is the +0.25% column.
| Loan Amount | −0.50% | −0.25% | Current | +0.25% | +0.50% |
|---|
Calculated on a 30-year principal & interest loan at today's lowest owner-occupier variable rate on Compare & Select. Actual impact depends on your specific loan, lender and remaining term.
Sources and dates. ABS Consumer Price Index, September 2026 (28 October); ABS Labour Force, September 2026 (15 October); ABS National Accounts, June 2026 (2 September); Productivity Commission productivity update, September 2026; RBA statement of 29 September 2026; Deputy Governor Hauser’s remarks at the Citi conference (21 October); ABS trade figures as reported by Trading Economics; bank forecasts (ANZ, Westpac, CBA, NAB, UBS) and market pricing as reported by ABC, The Adviser, MPA, LSEG, Bloomberg and Reuters. Information is as at 28 October 2026 and will change before the decision.
Everything on this page that is analysis, a call or commentary is generated by Claude, an AI language model, and does not represent the views of any real person, economist or institution. Adam Smith and John Maynard Keynes are historical figures long deceased; their commentary here is AI-written speculation based on their known economic philosophies, not anything they actually said. Dr. Martin Reyes, Dr. Alicia Cheng and Prof. Ross Fairweather are entirely fictional personas invented for this feature and do not correspond to any real economist. Our call, the probabilities shown and the illustrative arithmetic are not financial advice, a forecast to rely on, or a reliable prediction of the RBA’s decision. The calculator provides estimates only. Always consult a licensed financial adviser or mortgage broker, and refer to the RBA’s own published statements, before making any borrowing decision.
Five AI economist personas weighed in ahead of the Reserve Bank’s 29 September 2026 cash rate decision. This review is preserved here as published, with the outcome added.
Scottish philosopher (1723–1790), author of The Wealth of Nations. Pioneered the idea that markets self-regulate through the "invisible hand" — provided money keeps its value.
Sound money is the foundation of a functioning market. When a currency's value is allowed to erode, it becomes an invisible tax on every transaction, distorting the very price signals that guide rational economic activity. Inflation running above target tells us demand still outpaces the economy's productive capacity. Hold rates too low for too long, and you reward debtors at the expense of savers — and in doing so, you break the trust on which all credit depends.
British economist (1883–1946) whose General Theory transformed how governments respond to recession, arguing policy should actively smooth the business cycle rather than wait for markets to self-correct.
In the long run we are all dead, and in the meantime households service real mortgages on real incomes. The easing in the monthly inflation print — from 3.8% to 3.5% — is not noise, it is early evidence that three prior rate rises are still working their way through the economy with the customary lag. To tighten again before that transmission completes risks manufacturing a downturn to solve a problem that is already correcting itself. The Bank should show patience, not urgency.
A fictional persona in the pragmatic, credibility-focused tradition of modern inflation-targeting central banking — shaped by decades of crisis-era monetary policy experience.
Credibility is a central bank's most valuable and most fragile asset. Trimmed mean inflation — the measure that strips out one-off noise — has barely moved this month, sitting at 3.6%, still well above the target band. That persistence, not the softer headline number, is what should worry the Board. A quarter-point move now is a small price for keeping medium-term inflation expectations anchored; the cost of losing that anchor and needing a larger, more disruptive correction later is far higher.
A fictional persona in the empirical, labour-market-focused tradition — sceptical of crowded consensus forecasts and focused on what real-time data shows rather than the prevailing narrative.
Every major bank economist is now calling the same outcome, which is itself a reason for caution — crowded consensus calls are exactly the ones markets get wrong. Look past the headline: monthly inflation has fallen for two straight readings, credit growth has slowed sharply since the last three hikes, and housing turnover is already cooling. Raising again before that data fully plays out risks tightening into a slowdown that is already underway. Wait for one more read before moving.
A fictional persona in the structural-economics tradition — focused on Australia's terms of trade, resource dependence, and the long-run cost of global energy shocks on the domestic price level.
Australia's inflation story can't be separated from what's happening well beyond our shores. Middle East tensions are already pushing global energy costs higher, and that imported inflation shows up in transport and input costs long before it reaches the local CPI print. Domestic demand alone doesn't fully explain the persistence in underlying inflation — global supply risk does. The Bank should treat this as a genuine external shock requiring a firm, pre-emptive response, not a temporary blip to wait out.
The panel's pre-meeting call was 3–2 toward a 25 basis point hike — and that's exactly what happened. Going in, that majority view lined up with NAB, CBA and Westpac, all of whom had forecast a hike. ANZ went further still, flagging a possible second rise by November, which is exactly what the 3 November meeting will now test.
Where the panel differed from the banks wasn't the headline call so much as the reasoning behind it. Smith, Reyes and Fairweather each got there from a different direction — sound-money principle, inflation-credibility risk, and imported energy costs respectively — while the dissenting pair, Keynes and Cheng, both pointed to the same thing: the prior three hikes may not have fully flowed through yet, and moving again risked over-correcting into a slowdown already underway. The RBA's own statement — that it would hike further "if needed" — leaves that debate open rather than settled.
Money markets had priced roughly a 70–90% probability of a hike in the days leading into the September meeting, according to interest rate futures.
The 48 hours since the September decision have told two different stories, and it's worth being upfront that they genuinely conflict rather than pretending there's a clean consensus.
The case for another hike: the RBA's own statement dropped its earlier conditional language ("if upside risks materialise") in favour of a flatter commitment to keep raising rates "if needed" — a notably more hawkish shift. Westpac's research note, published the day of the decision, called a November follow-up hike "the base case," citing energy prices and the Middle East conflict as the main ongoing risk. ANZ remains the most hawkish of the big four, still forecasting a fifth hike this year to 4.85%.
The case for a hold: the very next day, August's monthly CPI print landed — headline inflation actually rose to 4.0% (from 3.5%), but came in below what markets had forecast, and trimmed mean inflation held steady at 3.6%. That "miss" against expectations, more than the headline number itself, saw money markets sharply cut the implied probability of a November hike to around 20%, down from the "near-certain" framing of just a day earlier.
Our honest read: this is a genuinely live call, not a settled one. The next major input is the September-quarter CPI, due in late October — a number that will matter far more to the Board than any single monthly read. Until then, expect the big four to keep shifting their calls as fresh data lands, the same way they did between August and September this year.
Everything on this page is generated by Claude, an AI language model, and does not represent the views of any real person, economist, or institution. Adam Smith and John Maynard Keynes are historical figures long deceased; their "commentary" here is AI-written speculation based on their known economic philosophies, not anything they actually said. Dr. Martin Reyes, Dr. Alicia Cheng and Prof. Ross Fairweather are entirely fictional personas invented for this feature and do not correspond to any real economist. None of this content is financial advice, a forecast, or a reliable prediction of the RBA's actual decision. The calculator above provides estimates only. Always consult a licensed financial adviser or mortgage broker, and refer to the RBA's own published statements, before making any borrowing decisions.
Last updated: October 2026
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