EconomyIntel Weekly Brief – 10 October 2026
The Australian economy remains in transition, with growth at trend, inflation flat but broadly elevated above the RBA's 2–3% inflation target band, and a labour market showing signs of softening. The cash rate stands at 4.60% following a 25 basis point increase in September, leaving monetary policy neutral. Real wages continue to contract. The base case assigns a 57.2% probability to the transition regime persisting, with stagflation risk at 34.7% and expansion at 8.1%. System health is strong at 91 out of 100, though consumer sentiment and real wage pressure remain acute.
The scenario distribution framing this edition.
Published analysis · evidence-led read
As at 10 October 2026, the Australian economy is in a transition regime. GDP grew 0.4% in the quarter and 2.12% year on year, consistent with trend growth. The output gap is –0.2 percentage points. Headline CPI is 4.0% year on year and the trimmed mean is 3.6%. Inflation remains flat and broad, with the inflation gap at 1.1 percentage points above the 2.5% midpoint of the RBA's 2–3% inflation target band. The unemployment rate is 4.65%, sitting 0.15 percentage points above the NAIRU, and the labour market is softening. The Wage Price Index rose 3.2% year on year, while real wage growth is –0.77%. The RBA cash rate is 4.60%, the Taylor rate is 4.55%, and the policy gap is 0.05 percentage points. Policy is neutral and there is no labour–policy tension.
Published analysis · evidence-led read
The base case is transition with a probability of 57.2%. The downside scenario is stagflation with a probability of 34.7%. The upside scenario is expansion with a probability of 8.1%. The September RBA decision raised the cash rate by 25 basis points to 4.60%, responding to upside inflation risks that have materialised. The Board cited a broadened Middle East conflict pushing global energy prices much higher than August forecasts, AI-related demand driving rapid growth in technology goods prices, persistent domestic capacity pressures, and recent inflation outcomes stronger than expected. The Board stated that with inflation still too high and the focus on ensuring high inflation does not become embedded, a further tightening in financial conditions is warranted to support a return of inflation to the 2–3% target band in a reasonable period. A conditional tightening bias remains in place.
This is general economic intelligence only. It does not constitute personal financial advice. Always consult a licensed financial adviser before making investment decisions.