Transition regime persists as inflation overshoots amid trend growth

Australia's economy remains in a Transition regime with moderate confidence (71.7/100), as inflation runs 1.1 points above the RBA's 2–3% inflation target band at 3.6% (trimmed mean) while growth tracks at trend pace (2.6% YoY). Continuation of the current transition regime holds a 57.3% probability, outweighing both the 28.8% risk of adverse shift to stagflation and the 13.9% chance of favourable shift to expansion. Monetary policy sits in neutral territory with the cash rate 0.31 points below the Taylor rate, while the labour market remains balanced despite weak real wage growth of -0.5%.