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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’s August forecast, citing renewed energy-price pressures and domestic capacity constraints. The cash rate target has risen by 100 basis points this year, including a 25-basis-point increase since the committee’s June hearing. Bullock also addressed payments and cash distribution, but the supplied statement excerpt contains no further detail on those topics.
Reserve Bank of Australia Governor Michele Bullock told a Senate committee on 28 October that inflation is likely to run higher than the central bank expected in August, pointing to renewed global energy costs and persistent domestic capacity pressures. Her assessment matters for households and businesses because the cash rate target has risen by 100 basis points this year, and the RBA says further subdued demand is needed to bring inflation down sustainably.
In her opening statement to the Senate Economics Legislation Committee’s supplementary budget estimates hearing, Bullock said the Monetary Policy Board had raised the cash rate target by 25 basis points since the committee’s previous hearing in June. That brought the cumulative increase in the target rate during 2026 to 100 basis points. She said the board acted with the goal of returning inflation to target.
The RBA aims to return inflation to the midpoint of its 2–3 per cent target range, while balancing that objective with full employment. Bullock said inflation had fallen from a peak of 7.9 per cent at the end of 2022 and was within the target range for a period in 2024 and 2025, following monetary tightening in 2022 and 2023. It picked up in the second half of 2025 and has remained above target since, at around 3½ to 4 per cent in year-ended terms.
Bullock attributed the renewed pressure to both domestic capacity constraints and international costs. She said the Middle East conflict had escalated again, pushing energy prices above the assumptions used in the RBA’s August forecasts. Higher oil and related costs can lift inflation directly and through businesses’ transport and other expenses. She also cited short-term inflation expectations, weather-related costs and stronger demand for supply-constrained technologies linked to the global artificial intelligence boom.
Higher Inflation Risks Shape Rate Outlook
The governor’s warning signals that the path back to the RBA’s inflation target may be slower than the central bank projected in August. At that time, its published forecasts showed inflation returning to around the midpoint of the target range in late 2027. Bullock said newer developments suggest inflation will likely be higher than that forecast’s base case, although the statement does not provide a revised forecast or set out a new timetable.
For borrowers, households and businesses, the outlook matters because rate increases affect borrowing costs and demand over time. Bullock said the full effects of recent rises have yet to be felt in domestic activity, while household spending growth has moderated only gradually. The RBA’s concern is that inflation remaining above target for too long could feed into expectations and then into decisions about prices and wages.
The statement also links weak productivity growth to limits on how quickly the economy can expand without adding to price pressure. Bullock described this as a challenge for Australians’ real spending power over the next few years. Her remarks are an assessment of risks, not an announcement of a particular future rate decision.
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From 2022 Inflation Peak to Renewed Pressure
The RBA’s monetary policy board sets the cash rate to guide inflation back to target while pursuing full employment. Bullock said the bank allows flexibility over the timeframe for meeting its inflation objective, but warned that an extended departure from target can become embedded in inflation expectations and influence price- and wage-setting.
Inflation had eased after the significant tightening of monetary policy in 2022 and 2023, reaching the RBA’s target range for a time in 2024 and 2025. It rose again in the second half of 2025. In August, the RBA had assessed risks to its outlook as tilted upward; Bullock said some domestic and international risks have since materialised or are materialising. The committee hearing followed the RBA’s previous appearance in June, after which the board lifted the cash rate by 25 basis points.
The statement covers more than monetary policy. Bullock said she and her colleagues would answer questions about the RBA’s wider responsibilities, including the payments system, banking services for government agencies and the supply of banknotes. She said she would provide updates on payments and cash distribution, but the supplied statement text does not give details of those updates.
“Inflation will therefore likely be higher than was our base case in August.”
— Michele Bullock, RBA governor
Updated Forecasts and Rate Decisions Await
Bullock did not give a revised inflation forecast in the supplied opening statement, so the size and timing of the expected increase above the August base case remain unclear. The statement also does not specify how the latest energy-price shock will affect inflation in coming months or how long those effects may last.
The RBA’s description of the labour market is qualified: unemployment has recently risen a little more than expected, but the bank judges the market to be somewhat tighter than it previously assessed. The statement does not give a new rate decision or say whether another increase is planned. It also provides no detailed findings on payments-system changes or cash distribution, despite identifying them as topics for the hearing.
Committee Questions and RBA Updates
Bullock and her colleagues were appearing to answer questions from the Senate Economics Legislation Committee. The hearing provides senators an opportunity to question the RBA about the cash-rate decisions, inflation outlook and its other responsibilities, including payments and cash distribution.
For monetary policy, the next key information will be the RBA’s updated assessment of inflation, demand and capacity pressures in its subsequent communications and forecasts. The opening statement does not announce when the board will next change rates or commit it to a particular decision. The bank says policy works with a lag, so the full impact of the increases already made remains to be seen.
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 base-case forecast, citing rising global energy prices and domestic capacity pressures.
How much has the cash rate target risen this year?
Bullock said the target had increased by 100 basis points during 2026, including a 25-basis-point increase since the committee’s June hearing. The statement does not give the cash rate’s current level.
Why does the RBA expect inflation to remain elevated?
The governor cited higher energy and transport costs, other global cost pressures, and domestic capacity constraints. She also pointed to weak productivity growth as a limit on how quickly the economy can grow without adding to inflation.
Did Bullock announce another interest-rate rise?
No. The opening statement describes the reasons for recent rate decisions and the changing inflation outlook, but does not announce a new rate decision or commit the board to a future increase.
When did the RBA expect inflation to return to target?
The RBA’s August forecast projected inflation returning to around the midpoint of its 2–3 per cent target range in late 2027. Bullock said inflation would likely be higher than that forecast’s base case; she did not provide a replacement date in the statement.
Source: bis.org
