RBA deputy governor Andrew Hauser said, "We're probably rather closer now to a more sensible level of long-term global real interest rates than we were a year or two ago."
More economists have joined financial markets in tipping a September rate hike, with the possibility of another in November.
The RBA's Monetary Policy Board will meet on September 28-29 to determine the next move in the cash rate target.
Economists believe that the Reserve Bank's senior officials have decided that interest rates need to be hiked in September, and they expect the RBA's board to rubber stamp an increase in the cash rate to 4.6 per cent.
This view was already developing following public appearances by deputy governor Andrew Hauser on the ABC's 7.30 program last week and the bank's chief economist Sarah Hunter at two conferences over the past fortnight.
"We think tactically November's a better choice but certainly the internal members of the board are making noises that they want to go," former RBA assistant governor and current Westpac chief economist Luci Ellis told ABC News yesterday.
However, an appearance in front of the federal parliament today by RBA governor Michele Bullock, deputy governor Andrew Hauser, and assistant governors Sarah Hunter and Brad Jones has many economists firmly convinced the bank will hike at the end of its next two-day meeting on September 29.
RBC's head of economics and rates strategy Robert Thompson was previously expecting a rate rise in November, but is now forecasting one at the September meeting as well which, if correct, would take the cash rate to a peak of 4.85 per cent — the highest level since before rates fell in the wake of the 2008 global financial crisis.
"September now seems all but a lock, with November becoming the more contentious decision-point. On the other side of the cycle, we keep a first cut in November 2027," he wrote in a note this afternoon.
Marcel Thieliant from Capital Economics agrees that a September rate hike "now looks like a done deal".
However, he thinks that will be the RBA's last move higher.
"Monetary policy is already quite restrictive and we think the bank will be wary of causing a sharp rise in the unemployment rate," he argued.
Financial markets are now pricing in a 95 per cent chance of a rate rise in September, according to LSEG data, with a 37 per cent chance of a follow-up hike in November.
The clearest indication that interest rates are likely to move even higher, and potentially stay there, came from RBA deputy governor Andrew Hauser.
He backed a view that had been recently expressed by leading US economist Kenneth Rogoff that the decline in long-term interest rates between the GFC (2007-2009) and COVID-19 (2020) was an anomaly, rather than the norm, and that we're now returning to a more normal period in which long-term interest rates will be higher.
"Interest rates were never going to be zero or near zero for a long while," Mr Hauser observed.
"We all thought maybe they normalised a year ago.
He wondered aloud whether the angst about current levels of interest rates might be related to people coming to terms with that.
"I think the interesting question is, have borrowers adjusted to that new reality?"
RBA governor Michele Bullock gave indications that the bank's ability to "look through" higher oil and fuel prices might be wearing thin, noting they have been elevated for much longer than people were originally anticipating.
"I think there's much more of an inclination [from businesses] to think that we need to pass through these cost increases because it's going to be much more persistent," she said.
"So they're the sorts of things that are shaping our views, I think, and shaping the views of overseas central banks."
While the bank has repeatedly and recently reiterated its desire to protect as many of the employment gains post-COVID as it can, Ms Bullock said that is also becoming more difficult.
"And the other point I would make is that these supply shocks, the Middle East in particular, it has worsened the trade-off between inflation and employment," she told the committee.
"And a typical textbook response people say is, 'Well, it's a transitory shock. You look through it, and then it will come back.'
"But … it's much harder to look through when there are persistent shocks, because of the risk that will flow through to inflation expectations.
Both Ms Bullock and Mr Hauser get a vote on the nine-person Monetary Policy Board that will meet on September 28-29 to determine the cash rate.
While the RBA governor said that "conditions in the housing market have softened, and a larger-than expected easing could be a downside risk to economic activity," she also played down the degree of the decline.
"These falls follow a period of strong growth — housing prices are still around 50 per cent higher than they were in early 2020," Ms Bullock observed.
Brad Jones, the RBA's assistant governor (financial system), who is in charge of safeguarding financial stability, said the surge in Australian house prices were far larger than in other comparable countries.
"If your starting point for that comparison is prior to COVID, the run-up in Australian housing prices exceeds that of large advanced economies, also smaller open economies," he commented.
"It's been a very material run-up, and so we've seen 5 per cent to 6 per cent declines in Sydney and Melbourne, 1 per cent to 2 per cent in the other states."
He said, in that context, the property price declines in Australia this year have "not been overly material".