Reserve Bank deputy governor Andrew Hauser singled out the two risks to inflation in a speech in Brisbane on Wednesday.
While the economy was slowing as a result of the RBA's three interest rate hikes in 2026, with slightly slower growth in consumption and employment, it would need to slow further to get inflation back to target, he said.
"That's not a slump. It's not a depression. We're forecasting consumption will still grow by 1.5 per cent a year or thereabouts. Employment will still grow above one per cent," Mr Hauser said.
He and the rest of the RBA board left the cash rate on hold at 4.35 per cent earlier in August, but the board was still worried about the inflationary outlook.
"One is the Middle East crisis and the possibility that gets worse again,'' he said.
"I thought, as many of you did, perhaps a few weeks ago, that with the announcement of a peace deal, that things will calm down. That hasn't been the case, so we're watching that closely.
"Secondly, there's an extraordinary boom going on in the global economy in AI and the tech sector, and particularly in trading partners that we have.
"Anyone who's tried to buy a laptop recently will know that the price of memory for example has gone up sharply. That threatens inflation from overseas."
But homegrown inflationary pressures were also troubling the RBA.
Australia's sluggish productivity growth rate meant the economy's relatively subdued rate of expansion threatened to push up inflation.
"Weak supply growth ... capacity, productivity growth at home is also something we're watching closer," Mr Hauser said.
"If those upside risks to inflation crystallise and we don't see inflation coming down, we'll have to raise interest rates again and we'll do so."
Wage growth figures from the Australian Bureau of Statistics on Wednesday should at least reassure the RBA a wage-price spiral was not occurring, EY senior economist Paula Gadsby said.
The wage price index for the June quarter remained at 0.8 per cent, slowing the annual growth rate to 3.2 per cent.
The data was largely in line with economist predictions.
The RBA board would still keep a close eye on broader cost-labour measures, Ms Gadsby said.
"With productivity growth weak, even moderate wage increases can keep unit labour costs elevated while the economy remains capacity constrained," she said.
Analysts at Citi expect wages growth to accelerate in the September quarter, when the impact of the Fair Work Commission's 4.75 per cent boost to award wages would be felt in the economy.
While nominal wages growth has stayed relatively robust, because of the spike in inflation, workers went backwards 0.6 per cent in real wage terms.
Treasurer Jim Chalmers said real wages were still up for the quarter.
"To have nominal wages growth above three per cent for the duration of our government compared to not in any quarter under our predecessors, I think gives you a sense of the progress that we are making," he told reporters.
Salary growth in the public sector outpaced wage rises in private industries for the sixth quarter in a row.
Public-sector wages increased by 3.4 per cent for the quarter, down slightly from a 3.7 per cent boost in June 2025.
In the private sector, there was a 3.1 per cent increase, less than the 3.4 per cent gain the year before.
"Rises paid to state government public service jobs were the main driver of public-sector growth, supported by scheduled rises paid under the existing APS-wide enterprise agreement for Commonwealth employees," the bureau's head of price statistics Rachael McCririck said.
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