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Reserve Bank of Australia Governor Michele Bullock told a Senate committee on 28 October that inflation is likely to be higher than the RBA expected in its August forecast. She cited rising global energy costs, other international price pressures and domestic capacity constraints, after the Monetary Policy Board raised the cash rate by 25 basis points since the committee’s June hearing. The supplied statement does not include the full economic outlook or details of the payments and cash-distribution update.
Reserve Bank of Australia Governor Michele Bullock told a Senate Economics Legislation Committee hearing on 28 October that inflation is likely to be higher than the bank forecast in August, as rising global energy costs compound domestic price pressures. Her opening statement also confirmed that the Monetary Policy Board had lifted the cash rate target by 25 basis points since the committee’s previous hearing in June, bringing the cumulative increase this year to 100 basis points.
Bullock said inflation had risen from its peak of 7.9 per cent at the end of 2022, returning to the RBA’s 2–3 per cent target range for a period in 2024 and 2025 before picking up in the second half of 2025. It has remained above target since then, at around 3½ to 4 per cent in year-ended terms, she said.
The governor identified renewed conflict in the Middle East and higher global energy prices as sources of added pressure. Higher oil and related costs affect prices directly and can also raise businesses’ transport expenses, which may then be passed on to customers. Bullock also pointed to cost pressures associated with the artificial-intelligence boom and extreme weather, including higher prices for some agricultural and technology-related goods.
She said domestic conditions remained part of the inflation problem. In the RBA’s assessment, the labour market appeared somewhat tighter than previously judged, while underlying inflationary pressures remained elevated. Bullock linked weak productivity growth to a limit on how quickly the economy can expand without adding to inflation. The bank’s August forecast had inflation returning to around the midpoint of its target range only in late 2027; the governor said recent developments suggested inflation would likely be higher than that forecast’s base case.
Higher Inflation Could Extend Rate Pressure
The changed outlook matters to households and businesses because persistent inflation can prolong pressure on prices and purchasing power. The RBA’s stated aim is to return inflation to the midpoint of its target range while also meeting its full-employment objective. Bullock said leaving inflation above target for too long risks it becoming embedded in expectations, which can influence wage-setting and price-setting decisions.
The latest rate increase is intended to help bring inflation back towards target, but monetary policy works with a lag. Bullock said the full effects of recent increases have not yet been felt in domestic activity. That leaves policymakers balancing the need to curb inflation against the effects of tighter policy on demand, employment and economic growth. Her statement indicates that higher global costs have made that task more difficult, even as domestic demand growth slows.
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Rate Rises Follow Inflation’s Return
The RBA sets monetary policy to achieve low and stable inflation and full employment, and has a target range of 2–3 per cent. Bullock said the board’s approach is to bring inflation back to the midpoint of that range, while allowing flexibility over timing so it can also pursue its employment objective.
Inflation fell substantially after monetary policy was tightened in 2022 and 2023, reaching the target range for a period in 2024 and 2025. It subsequently picked up. The 25-basis-point increase since the June committee hearing brought the cumulative cash-rate target increase for 2026 to 100 basis points, according to Bullock’s statement. The supplied material does not state the cash-rate target level after that move.
The governor said growth in the Australian economy was slowing as expected and domestic demand growth was easing gradually. Business investment, however, had picked up strongly, driven mostly by spending on data centres, according to her opening remarks. The statement was delivered by videoconference to the Senate committee as part of supplementary budget estimates.
“Inflation will therefore likely be higher than was our base case in August.”
— Michele Bullock, RBA governor
Forecast Risks Still Shifting
The statement does not provide a revised inflation forecast or a new date for inflation’s expected return to the target midpoint. Bullock said the August forecast pointed to late 2027, but that recent developments were likely to push inflation above the forecast’s base case. The size and duration of that change were not specified in the supplied remarks.
It is also unclear from the statement how the board will respond at its next meeting. Bullock described inflation risks and the existing policy setting but did not announce another rate decision. The supplied source text ends partway through her discussion of economic activity and does not include the promised update on the payments system and cash distribution, or the full answers to senators’ questions.
Committee Questions And New Forecasts
Bullock and her colleagues were appearing to answer questions from the Senate Economics Legislation Committee. The hearing gives senators an opportunity to question the RBA about its policy decisions, outlook and other responsibilities. The governor said she would also address the payments system and cash distribution, though those details are not present in the supplied text.
Further clarity on the inflation outlook is expected through the RBA’s subsequent forecasts and policy communications. Until the bank publishes updated projections or makes another rate decision, the August forecast remains the stated published benchmark, with Bullock’s warning that the outlook has since become more inflationary. The timing and scale of any further policy response remain undecided in the material provided.
Key Questions
What did the RBA governor tell the Senate committee?
Michele Bullock said inflation is likely to be higher than the RBA’s August forecast because of increased global costs and continuing domestic capacity pressures.
How much has the cash rate target risen this year?
Bullock said the board’s increase since the June hearing was 25 basis points, bringing the cumulative increase in the cash rate target this year to 100 basis points. The supplied statement does not give the resulting target level.
What is pushing inflation higher?
The governor cited higher energy prices linked to renewed conflict in the Middle East, other global cost pressures, and domestic capacity constraints. She also mentioned price pressures affecting some agricultural and technology-related goods.
When does the RBA expect inflation to return to target?
The RBA’s August forecast projected a return to around the midpoint of the target range in late 2027. Bullock said recent developments suggested inflation would likely be higher than that forecast’s base case; the supplied statement does not give a revised date.
Did Bullock announce another rate rise?
No new rate decision was announced in the supplied opening statement. Bullock discussed the outlook and existing policy decisions, but the next move was not specified.
Source: bis.org
