Reserve Bank deputy says inflation outlook is "materially worse"

Andrew Hauser says oil is about a third dearer than the bank assumed. Markets now see a higher chance of a rate rise next month.

Confirmed

Inflation looks worse than the Reserve Bank of Australia (RBA) expected, one of its top officials says. Deputy Governor Andrew Hauser spoke at a conference in Sydney on Wednesday. "The inflation outlook looks materially worse than we projected in the August report," he said. Inflation is how fast prices rise. Mr Hauser said oil prices are "about a third higher than we assumed". He said more businesses think 3 to 3.5 per cent inflation "is the new normal". "That is the central banker's nightmare," he said. The bank aims for inflation between 2 and 3 per cent. He said "only about 2 per cent of mortgages" are in negative cash flow. That means costs are bigger than income. But he said "15 per cent of renters" are. After his comments, markets implied "around a 40% chance" of a rate rise next month, Reuters reported on Wednesday. That was up from 30 per cent at the start of the week. The cash rate is now 4.60 per cent. The RBA board meets on 2 and 3 November. Its decision is not yet known.