RBA Deputy Governor Hauser says Australia's economy is overall in good shape and there will be a very genuine policy debate at the board meeting, with arguments on both sides

• A 5% peak for inflation probably looks a little on the pessimistic side; our response depends on size and persistence of the price shock, which is very uncertain.
• Inflation is too high.
• Oil price rise clearly an upside risk to the inflation projection but still in flux.
• Recent data seem to confirm even more decisively that the economy has limited spare capacity.
• Not all domestic data came in as strongly as expected, including consumption.
• Uncertainty over developments in Iran is extremely high.
• Data seems to confirm the economy has limited spare capacity.

RBA Deputy Governor Hauser's remarks suggest a balancing act for policy, acknowledging that while inflation is elevated, the economy still shows resilience. The mention of both sides in the upcoming policy debate signals potential shifts in guidance, particularly in response to inflationary pressures from oil prices and recent domestic data weaknesses. This dynamic could heighten volatility in AUD and influence fixed income markets as traders assess the risk of tightening versus growth concerns.