Australia’s Monetary Policy in Nov 2025 –What is Monetary Policy?
Monetary policy is how a country’s central bank steers the economy. Think of it as the financial thermostat – used to heat things up when growth is slow, or cool things down when inflation runs hot.
It works mainly by tweaking interest rates and controlling the flow of money. Lower rates usually mean more borrowing, spending and investing. Higher rates slow down economic activity, curbing inflation and encouraging saving.
In Australia, the Reserve Bank (RBA) uses these levers to maintain stable prices and keep people employed. They aim for that sweet spot where inflation sits between 2–3% and the economy grows at a steady pace.
RBA Doesn’t Cut Interest Rate
The cash rate stays at 3.60 per cent. Inflation has cooled since 2022 but picked up again in September. Trimmed mean inflation is 3.0 per cent, headline 3.2 per cent. Some of this rise looks temporary, yet forecasts keep inflation above 3 per cent for now, easing to 2.6 per cent by 2027.
Domestic Picture
Private demand is climbing – households are spending more, businesses are investing more. Housing prices are rising, construction costs turning upward, credit flowing. Labour market still tight: unemployment at 4.5 per cent, vacancies high, wages growth cooling but unit labour costs heavy. Productivity remains weak.
Risks & Uncertainty
If demand runs hotter than expected, pressure builds on labour and costs, making it easier for firms to pass on price rises. Global risks linger – trade policies, geopolitics – though near‑term growth forecasts have lifted. Policy effects take time; balance between demand and supply is still uncertain.
The Board’s Focus
Price stability. Full employment. Inflation pressures remain, demand is recovering and labour is still tight. So the cash rate stays put. The Board will watch the data, weigh risks both ways, and act as needed.
Please click here to read the full RBA report
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