RBA on an extended pause, but easing cycle not over

With underlying inflation in Australia having surprised materially to the upside in Q3, the RBA is all but certain to leave rates unchanged next week. However, unlike several other analysts we're not calling time on the Bank's easing cycle just yet. With unit labour cost growth on track to subside, the recent stickiness in services inflation is unlikely to be sustained. At the same time, business surveys point to renewed disinflationary pressures in the goods sector as well. The upshot is that we believe the RBA will have scope to deliver a couple more rate cuts in the second half of next year.