Australians could be hit with another interest rate rise on Melbourne Cup Day, with the Reserve Bank of Australia signalling it faces difficult decisions ahead of its November board meeting as the country's inflation crisis shows no sign of easing.

RBA Deputy Governor Andrew Hauser has acknowledged the central bank is weighing the need to bring inflation to heel against the very real economic pain that further rate increases would impose on households and businesses across the country.

If the RBA moves to lift the cash rate at the November meeting, it would mark the fifth rate increase this year, piling further pressure on mortgage holders and renters already struggling with the rising cost of living. Our earlier coverage of an interest rate rise looming alongside budget relief measures flagged the growing tension between fiscal and monetary policy.

A 50-50 Call With Real Consequences

Fault Lake Asset Management founder Christian Bayliss described the likelihood of a Melbourne Cup Day rate hike as a genuine coin toss, but warned that inaction carried its own serious risks.

"It is a 50-50, but you can see that this is turning into an inflation emergency because it is high time now," Bayliss said, noting the inflation problem has been running too hot for close to five and a half years.

Bayliss was clear that any decision to push rates higher would not come without cost. He estimated that every 25 basis point increase in the cash rate translates to roughly 15,000 foregone job opportunities across the economy, a sobering figure for workers and businesses in sectors already under stress.

Despite that risk, he argued the RBA cannot afford to look away from the inflation problem, describing the damage already done to household budgets as severe and measurable.

The $14,000 Hit Every Household Is Carrying

Bayliss put hard figures to the inflation burden, pointing out that inflation has averaged 4.5 per cent annually since mid-2021, compared with the RBA's official target of 2.5 per cent. The sustained overshoot has not been abstract: it has directly eroded living standards in a way most Australians feel but may struggle to quantify.

"That basically means that the price level is 10.5 per cent above what it should be," he said. "Households are getting hit with $14,000 more per annum today on their household budgets than had we been able to achieve the inflation target."

He argued that frustration and financial stress in the community could be traced directly to that figure, even if people could not always name the cause. "When people feel angry, when they feel upset and they can't quite understand what is wrong in the economy, that is the tangible number," he said.

Inflation Expectations Becoming Entrenched

Beyond the immediate budget pressures, Bayliss raised a deeper concern: that Australians are beginning to accept elevated inflation as a permanent feature of the economy rather than a temporary disruption.

"The public is starting to learn that inflation is here to stay, and they are starting to learn that the public servants are not able to deal with it," he said.

This shift in expectations is itself dangerous, as households and businesses that anticipate ongoing high inflation tend to make financial decisions that can entrench it further.

Bayliss also pointed to a dysfunctional dynamic between the federal government and the Reserve Bank, with responsibility for the inflation crisis being passed back and forth between the two institutions. Regardless of where the blame lies, whether with pandemic-era stimulus, global forces or domestic policy decisions, he was unequivocal about who must ultimately act.

"Ultimately, it's the RBA's job to put out the fire," he said.

The RBA's November board meeting will be closely watched. For context on where rates have been sitting ahead of this decision, see our earlier report on the Reserve Bank holding the cash rate amid signs of cooling inflation.