Why did the Reserve Bank of Australia lift interest rates on three consecutive occasions earlier this year?

The Reserve Bank of Australia increased interest rates because internal research showed that the national economy was sitting on a steep section of the Phillips curve model.

What economic framework does the Reserve Bank of Australia (Market:RBA) use to guide its interest rate decisions?

The Reserve Bank of Australia relies on the Phillips curve framework, which maps out the relationship between consumer price inflation and unemployment queues.

What does a non-linear Phillips curve mean for the Reserve Bank of Australia policy strategy?

A non-linear model means that the Reserve Bank of Australia must respond proactively to inflationary shocks when the economy operates on the steep section of the curve.

What three specific economic variables did the Reserve Bank of Australia add to its forecasting model?

The Reserve Bank of Australia integrated sticky nominal wages that rarely fall, new measures of general labour market tightness, and shifting corporate hiring costs.

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RBA research validates early rate hikes

Written by Brie CarterPublished Jun 24, 2026, 10:45 PM

Internal central bank research confirmed that the link between inflation and unemployment is non-linear.
The structural economic data supported the decision by the board to lift interest rates on three consecutive occasions earlier this year.
The monetary authority aims to proactively counter inflationary shocks while operating on the steep section of the economic model.

The Reserve Bank of Australia released internal research validating its decision to lift interest rates on three consecutive occasions earlier this year.

The new analytical data contrasts with standard linear economic models by confirming a distinct, curved relationship between domestic consumer prices and national unemployment queues.

“Nonlinearities in the Phillips curve suggest that policy should respond proactively to an inflationary shock when we are already on the steep part of the curve — and that is what the Monetary Policy Board has done in recent months,” said RBA Deputy Governor Andrew Hauser.

The structural data details how bringing down inflation while the economy sits on this steeper section incurs a lower overall cost to broad economic activity than attempting lines of disinflation during flatter periods.

The central bank integrated three independent non-linear drivers into its updated Australian economic forecasting model, including sticky nominal wages, evolving measures of overall market tightness, and shifting corporate hiring costs.

The monetary authority also launched a public insights series authored by internal staff to display the underlying research that informed these recent policy decisions.