Australia’s July CPI Surprise Rekindles Odds of a Fourth RBA Rate Hike in 2026

The RBA now faces a dilemma reminiscent of 1994, when it tightened four times in seven months after a brief CPI uptick only to trigger a sharp housing slowdown. Like the 1973-74 oil shock and the 1990 Gulf War, today’s Middle-East conflict has lifted global fuel costs, showing how commodity spikes can bleed into shelter and services prices even as headline inflation slides. Structurally, Australia’s persistently high services and dwelling-construction inflation reflects chronic housing undersupply, elevated migration, and a labour market that—despite a tick up in unemployment to 4.5%—remains historically tight. Whether the RBA hikes again matters less for next quarter’s mortgage bills than for the long arc of policy credibility: since adopting an inflation target in 1993, the bank has rarely allowed core prices to sit above 3% for more than two years without action. A failure to respond now could erode that record; yet overtightening risks repeating the boom-bust cycles that have dogged Australian property every decade since the 1880s land crashes. In a century-scale view, the episode is another stress test of small, open economies’ ability to manage imported price shocks in an era of supply-chain volatility and climate-linked food disruptions—pressures that Singapore is already flagging for Q3.