The Economy, Stupid Did the RBA just choose recession?
Mar 19, 2026
Sherelle Murphy, EY Oceania Chief Economist and former central banker, and Gianni La Cava, ex-RBA research manager turned policy analyst, unpack why the central bank raised rates despite recession risk. They sift petrol’s outsized role in inflation. They debate board splits, transmission limits when government services swell, mortgage buffers and whether another hike is likely.
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Visible Petrol Price Spike Raises Inflation Expectations
- Petrol's price spike is highly visible and feeds into broader inflation via transport, fertilizer and food costs.
- ANZ Roy Morgan consumer inflation expectations jumped to about 6.7% after recent Middle East tensions.
Board Split Shows Uncertainty Over Oil Shock Persistence
- The board split (5–4) reflected urgency about inflation vs caution waiting on the oil shock's persistence.
- Some wanted to wait to see how pervasive supply effects and inventory shortages would become.
Preemptive Hikes Buy Flexibility For Later Cuts
- Raising rates now gives the RBA room to cut later if activity collapses from global shocks.
- Monetary policy can be reversed rapidly if forecasts show activity effects outweigh inflationary ones.