They said that:<\/p>\n
\nThis partly reflects higher fuel and other commodity prices affected by the conflict in the Middle East. But domestic capacity pressures are also judged to have been a little tighter than earlier thought … <\/p>\n
Capacity pressures appear a little tighter than previously estimated and there are indications that higher fuel prices are being passed through to prices of other goods and services. Inflation is now expected to remain above 3 per cent for the coming year and there is an increasing risk that higher inflation expectations will become embedded.\n<\/p><\/blockquote>\n
6 out of 9 members on the MPB voted to increase the policy target interest rate, which conditions mortgage rates and other longer-term corporate rates.<\/p>\n
Extraordinarily, the RBA concluded saying:<\/p>\n
\nThe Board will continue to do what it considers necessary to bring inflation sustainably back to target. Accordingly, the Board will be attentive to the data and the evolving assessment of the outlook and risks to guide its decisions. Monetary policy is well placed to respond to developments, and the Board is focused on its mandate to deliver price stability and full employment.\n<\/p><\/blockquote>\n
Do whatever is “necessary” in the logic of the RBA is not consistent with its dual legislative responsibility to “deliver price stability and full employment”.<\/p>\n
Here are some facts:<\/p>\n
\n
- The labour force data for September 2026 shows the unemployment rate had risen from 4. per cent to 4.7 per cent and the broad labour underutilisation rate (the sum of the unemployment and underemployment rates) has risen to 11 per cent.\n
- \n
- Since February 2026 when the RBA increased the rate from 3.6 to 3.85 per cent, unemployment has risen by 106.6 thousand persons or 17.1 per cent.<\/li>\n
- The rise in unemployment is overwhelmingly being driven by workers who want full-time work (96.7 thousand out of 106.6 thousand.<\/li>\n<\/ul>\n
They are thus deliberately trying to push more people into unemployment which makes a mockery of the RBA claims that it is focusing on full employment.<\/p>\n
The way institutions like the RBA get around this inconsistency is to redefine what they define as full employment.<\/p>\n
The back and forth in recent years by RBA officials, including the governor, on what constitutes the Non-Accelerating-Inflation-Rate-of-Unemployment (the dreaded NAIRU) is testament to this chicanery.<\/p>\n
The NAIRU is unobservable and has to be estimated.<\/p>\n
The econometric estimates are very inaccurate (wide standard errors) and make the point estimate useless for policy making.<\/p>\n
But the ideologues in the RBA just ignore these issues because making claims about the point estimate as if they know, more or less, what it is.<\/p>\n
The relevance here is that if official unemployment rate is above the estimated NAIRU, then the New Keynesians claim that the inflation rate will fall.<\/p>\n
Conversely, if official unemployment rate is below the estimated NAIRU, then the New Keynesians claim that the inflation rate will rise.<\/p>\n
And, importantly, the causality that is developed in the theoretical models is from unemployment rate to inflation via demand (spending) pressures.<\/p>\n
So, if the unemployment rate is below the NAIRU, these economists conclude that there is too much demand pressure in the economy and price stability requires that policy tighten total spending by pushing up the unemployment rate.<\/p>\n
The problem though is that the RBA (and economists who peddle this theoretical nonsense) keep revising the NAIRU estimate up when they find the estimates do not fit the theory.<\/p>\n
We saw that in the inflationary episode post COVID restrictions.<\/p>\n
The Governor of the RBA has admitted many times that the RBA uses the NAIRU to determine whether there is full employment or not and that currently (during the COVID inflation):<\/p>\n
\n… employment is above what we would consider to be consistent with our inflation target.\n<\/p><\/blockquote>\n
And so if corporations have market power and use it to push higher mark-ups to gouge more profits, then the RBA would try to stop that inflationary pressure by pushing up unemployment.<\/p>\n
The unemployment that finally stopped the profit push might be very high yet the RBA would call that full employment even though millions of workers would be without work.<\/p>\n
For a discussion of all this please refer to the blog post – Mainstream logic should conclude the Australian unemployment rate is above the NAIRU not below it as the RBA claims<\/a> (July 24, 2023).<\/p>\n
On June 20, 2023, the Governor (then Deputy Governor) of the RBA was in Newcastle for a business event and her speech was entitled – Achieving Full Employment<\/a><\/p>\n
In the Q&A, the Governor said that to stabilise inflation:<\/p>\n
\n… the unemployment rate will have to rise \u2026 the NAIRU \u2026 4\u00bd probably looks, we think, maybe in the ballpark.\n<\/p><\/blockquote>\n
In the Speech-proper, she said:<\/p>\n
\nThe unemployment rate is expected to rise to 4\u00bd per cent by late 2024 \u2026 While 4\u00bd per cent is higher than the current rate, this outcome would still leave us below where it was pre-pandemic and not far off some estimates of where the NAIRU might currently be. In other words, the economy would be closer to a sustainable balance point.\n<\/p><\/blockquote>\n
At the time, the official unemployment rate was around 3.5 per cent.<\/p>\n
Some time later, with the unemployment rate still below 4 per cent, the RBA seemed to modify its position and said the NAIRU was around 4.25 per cent.<\/p>\n
Now the unemployment rate is 4.7 per cent and the RBA claims it has to rise further.<\/p>\n
They cannot get a straight line on this and that is because there isn’t any consistent line that can be taken.<\/p>\n
The NAIRU concept is so fuzzy and estimates derived from econometric modelling are all over the place, that it really cannot be used to guide policy.<\/p>\n
What we saw in 2022 and beyond was that the unemployment rate in Australia was incredibly stable at around 3.6 per cent in the aftermath of the pandemic despite the inflation rate rising from below 3 per cent to its December 2022 peak above 8 per cent.<\/p>\n
The RBA claimed the inflation was because the unemployment rate was below the NAIRU estimate (the concept is unobservable of course).<\/p>\n
So off they went hiking rates but for the next year, inflation fell dramatically back to just over 3 per cent as the supply constraints arising from the pandemic eased.<\/p>\n
That was always going to happen.<\/p>\n
But the other thing we observed was that as the inflation peaked and then rapidly declined, the unemployment rate remained stable around 3.5 to 3.7 per cent (well below 4.5 per cent or even 4.25 per cent).<\/p>\n
If the RBA’s assessment of the NAIRU level was correct, then inflation should have been accelerating, given the official unemployment rate was below the RBA’s NAIRU estimate.<\/p>\n
But given the reality of a relatively stable unemployment rate and falling falling, then the logical conclusion would have been that the official unemployment rate must have been above the NAIRU if that concept was applicable.<\/p>\n
The RBA never responded to that criticism.<\/p>\n
What about the RBA claim that the economy is overheating in capacity terms?<\/p>\n
I have already noted that broad labour underutilisation is over 11 per cent now.<\/p>\n
That is, around 11 per cent of the willing and available labour resources are not working in one way or another – either not at all (unemployment) or less hours than desired (underemployment).<\/p>\n
What possible conception of full capacity could one have to claim that 11 per cent of labour resources not working who want to work constitutes full employment.<\/p>\n
Further, the Australian Industry Group compiles an – Capacity utilisation<\/a> – (as one the activity indicators as part of its Australian Industry Index outputs).<\/p>\n
The following graph is taken from that series (the solid line is the trend).<\/p>\n
It is common for firms to maintain some excess capacity, which is designed to allow them to meet unexpected increases in orders.<\/p>\n
However, as the graph shows over the period since 2022, capacity utilisation across the economy has significantly declined and is now at 76.1 per cent.<\/p>\n
That means that there 27.2 per cent of the available productive capacity is not being utilised.<\/p>\n
![\"\"](\"https:\/\/billmitchell.org\/blog\/wp-content\/uploads\/2026\/11\/Australia_AIG_CUT_October_2026.png\")
<\/a><\/p>\n![\"\"](\"https:\/\/billmitchell.org\/blog\/wp-content\/uploads\/2026\/11\/Australia_CPI_Component_Proportions_September_2026.png\")
<\/a><\/p>\n