FEAR & GREED | Business News Q+A: Why the Reserve Bank is in a pickle on rates
Mar 4, 2026
Belinda Allen, Head of Australian Economics at Commonwealth Bank, a macroeconomist who forecasts growth and inflation. She unpacks unexpectedly strong GDP growth and resilient household spending. They explore which sectors might cool to slow growth. Public spending, productivity needs, Middle East risks and the RBA's likely May rate decision are also discussed.
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Economy Running Above Its Speed Limit
- Australia’s economy is running above its speed limit at 2.6% annual growth, which explains recent hot inflation.
- Belinda Allen ties the strength to broad-based household spending and higher disposable income that let households both spend and save through 2025.
Household Spending Was Broad Based Not One-Off
- Household spending proved resilient and broad-based in 2025, not just driven by one-off events like concerts or the Ashes.
- Commonwealth Bank card and spending data showed consistent growth across ages and homeownership, leaving households with higher savings buffers entering 2026.
Rate Sensitivity Varies Across Growth Drivers
- To bring growth back toward potential the policy tool is higher interest rates, but key growth drivers are differently sensitive to rates.
- Business investment (data centres) is currently rate‑insensitive, dwelling investment is cooling, so it comes down to households and public demand.