NAB Morning Call Weekend Edition: Is Australia’s soft landing sustainable?
Dec 5, 2025
Sally Auld, a Senior NAB economist, dives into Australia's unique economic navigation post-inflation. She contrasts Australia’s gentle approach with New Zealand's harsher tactics, emphasizing how the RBA's cautious rate rises preserved jobs. Sally warns that limited spare capacity poses risks if growth accelerates too quickly, potentially igniting inflation. She discusses key indicators the RBA monitors and considers two scenarios for 2026, leaving listeners pondering the delicate balance of maintaining stability without tipping into inflation.
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Soft Landing Preserved Jobs But Tightened Capacity
- Australia achieved a soft landing by prioritising jobs while still bringing inflation down.
- That leaves the economy close to full capacity, increasing the risk of inflation if growth picks up.
Short-Run Capacity Constraints Are Real
- In the short run Australia is capacity constrained and cannot quickly expand supply.
- Increasing long-run supply requires productivity or higher participation, which take time to deliver.
Momentum Could Force Earlier Action
- Recent GDP and household spending data show momentum building into 2026.
- That momentum could force the RBA to act if demand keeps accelerating from here.