The RBA will keep interest rates on hold at 4.35% at the Tuesday 16 June 2026, RBA board meeting.

Governor Bullock all but told us at the last meeting that she would hold at the June 2026 meeting and see how inflation and the economy perform after 3 consecutive rapid-fire rises. 

At the moment headline inflation at 4.2% is a long way north of the RBA’s mandated requirement of 2 to 3 %. It takes at least 6 to 9 months for adjustments in interest rates to fully flow through to all corners of the economy. 

So where are interest rates heading and how is economic activity likely to play out?

RBA’s order of priorities 

To answer this question it is important to appreciate how the RBA currently orders its priorities, 

1. Inflation 
2. The economy 
3. Unemployment 

Currently, the RBA is squeezing life out of the economy with higher interest rates to contain demand and bring down inflation. The scary part is that we really haven’t had enough time to see the full impact on prices (especially food) due to the closure of the strait of Hormuz. 

The RBA could stay on hold for the rest of 2026 and into the early part of 2027 but further interest rate rises are not out of the question. It is impossible to tell at this stage—not even the RBA knows. 

However, in my opinion the bigger story to come will play out once the inflation high-water mark is found.  At this point the RBA will turn its focus to a slowing/stalling the economy. 

Could a pronounced slowdown be coming?

I believe there is the possibility of a more pronounced slow down than what most are expecting. Consider the following;

1. Higher interest rates 
2. Tax changes especially to housing 
3. Slowing/falling housing market with negative wealth effect consequences
4. Cost of living pressures due to higher inflation 
5. 6% increase in national minimum wage
6. Cutback in Government spending (quite possibly an over-reaction) to avoid being blamed for cost of living pressures 
7. Reduction in immigration to counter One Nation’s rise
8. Exorbitant construction costs
9. Government policy support measures to expire on 30 June 2026 such as $26.3 cents per litre fuel-excise tax. 
10. Low continuing productivity 

Hard or soft landing

How the RBA plays its hand with interest rates on the way down will have a big bearing on a hard or soft economic landing. If they wait too long to cut or cut too little it could lead to a hard landing maybe even a technical recession. 

Unfortunately, this RBA board is reactionary and I think the RBA could be slow to cut. They have experienced what happens to Governors when they made mistakes. They are also bruised from the embarrassing reversal of last year’s cuts. 

As always, we don’t know what President Trump will pull out of his golf bag of tricks or if/or when his Iran debacle will properly be over. What is known is that he still has 2.5 years to continue to rain chaos over the Global economy. 

Let’s see.

Interesting Fact – In 2006 Australia had net zero government debt. Today 20 years later we owe approximately 1 trillion dollars or about 35% of GDP – have we all been living in a false reality?