RBA flags rate pause but more rises likely

The Reserve Bank is eyeing the pause button but another interest rate lift before Christmas is still firmly on the table.

In the minutes from the November board meeting, members opened the door to a rate hike breather to give its earlier handiwork a chance to take effect.

"The board is prepared to keep rates unchanged for a period while it assesses the state of the economy and the inflation outlook," they said.

But the central bank board noted inflation was still well above its target range of two to three per cent and "expects to increase interest rates further over the period ahead" to bring demand and supply back into balance.

Since May, the RBA has been lifting interest rates furiously to rein in inflation, which hit 7.3 per cent in the September quarter.

This included four larger 50 basis point hikes but it slowed its pace of tightening in October to 25bps and followed that up with another smaller hike in November.

In Tuesday's meeting minutes, board members also outlined the reasoning behind its 25bp interest rate hike.

The lagging impact of rate hikes was mentioned again, as well as the effect of cooling house prices on consumer behaviour.

"Previous episodes of lower housing prices and turnover had seen a large effect on consumer spending, in part through the wealth channel of transmission," the minutes said.

A return to a 50bp hike was discussed - especially in light of hotter-than-expected inflation in the September quarter - but board members said this could drag on confidence.

"The board agreed that acting consistently would support confidence in the monetary policy framework among financial market participants and the community more broadly," they said.

Still, board members have not ruled out returning to larger hikes if the situation calls for it.

Royal Bank of Canada economists said the communications were consistent with another 25bp hike in December.

Chief economist Su-Lin Ong and macro strategist Robert Thompson said the discussion about other central banks around the world "erring on the side of doing too much rather than too little" suggested the central bank was under pressure to do the same.

"This is likely to keep pressure on the RBA to move rates higher and firmly into restrictive territory like many of its global counterparts," they said.

Meanwhile, September quarter arrivals and departures data revealed a pick up in visitors to Australia.

But arrivals from China are still down 90 per cent on pre-pandemic levels, the data from the national statistics bureau shows, with other countries responsible for the rebound in visitor numbers.

ANZ economists note fewer arrivals from China, the largest and biggest spending market, will slow the recovery of Australia's tourism and education sectors.

Despite the softening of China's zero-COVID policy, it's expected to remain in place in some form for the short term.

Consumer confidence as measured by ANZ and Roy Morgan has lifted for the first time in six weeks.

A bump in the "future financial conditions'' gauge helped push up the weekly indicator by 2.7 per cent.

But consumer sentiment remains well below historical averages and has a long way to go to recover from the cumulative 10.4 per cent decline in the previous six weeks.