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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 forecast in August. She cited renewed Middle East energy-price pressures alongside domestic capacity constraints, and said the cash rate target has risen by 100 basis points this year.
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’s August forecast, as renewed energy-cost increases and domestic capacity pressures weigh on the outlook. She said the Monetary Policy Board had raised the cash rate target by 25 basis points since its June hearing, taking the total increase this year to 100 basis points.
In an opening statement to the Senate Economics Legislation Committee’s supplementary budget estimates hearing, Bullock said the Board’s monetary policy goal is to return inflation to the midpoint of its 2–3 per cent target range, while also considering its full-employment objective. She said inflation had fallen from a peak of 7.9 per cent at the end of 2022 and stayed within the target range for a period in 2024 and 2025, before rising again in the second half of 2025. More recently, she said, annual inflation had been around 3½ to 4 per cent.
Bullock attributed the renewed pressure to both persistent constraints in Australia’s capacity to meet demand and global costs, particularly energy. She said the Middle East conflict had escalated again and oil prices were materially higher than assumed in the August forecasts. Higher transport and related costs could also feed through as businesses pass on expenses. She added that short-term inflation expectations were elevated and cited weather-related and technology-related price pressures, including demand linked to the global artificial-intelligence boom.
The Governor said the RBA’s August projections had inflation returning to around the target midpoint in late 2027. Developments since then, she said, indicated inflation would likely be higher than the August base case. The statement did not provide a replacement forecast. Bullock also said recent economic growth was slowing as expected, but the labour market appeared somewhat tighter than the RBA had previously judged, despite a larger-than-expected recent rise in unemployment.
Higher Inflation Could Delay Relief
The outlook matters to households and businesses because inflation staying above target can erode purchasing power and affect the cost of goods, services and borrowing. Bullock said inflation that remains above target for too long risks becoming embedded in expectations, which can influence price-setting and wage decisions.
For monetary policy, the combination of domestic demand pressures and higher global costs complicates the path back to target. Bullock said a further period of subdued aggregate-demand growth was needed to ease capacity pressures and bring inflation down sustainably. Rate increases affect activity with a lag, she cautioned, so the full impact of recent decisions has not yet been felt.
She also pointed to weak productivity growth as a longer-running constraint: in her assessment, it limits how strongly the economy can grow without adding to inflation. That makes the outlook relevant beyond the next rate decision, with implications for both real spending power and sustainable growth.
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From the 2022 Peak to Renewed Pressure
The RBA’s current inflation challenge follows a period of sharp price increases and policy tightening. Bullock said inflation reached 7.9 per cent at the end of 2022, then fell after significant monetary tightening in 2022 and 2023. It was within the target band for part of 2024 and 2025, but moved above it again from the latter half of 2025.
At its August meeting, the Board judged that risks to its inflation outlook were tilted upwards. The August Statement on Monetary Policy projected a return to around the midpoint of the target range in late 2027. The latest statement says some of those risks have since materialised or are materialising, including the energy shock. Bullock also noted that domestic demand growth was slowing, while business investment had picked up strongly, driven mostly by spending on data centres, according to her remarks.
The supplementary estimates hearing covers the RBA’s wider responsibilities as well as monetary policy. Bullock said these include supporting financial stability and a reliable, efficient and competitive payments system, providing banking services to government agencies, and supplying banknotes. She told the committee she would also provide an update on payments and cash distribution.
“Inflation will therefore likely be higher than was our base case in August.”
— Michele Bullock, RBA governor, in her 28 October opening statement
Forecast and Rate Path Remain Open
The statement does not give a revised inflation forecast or say whether the Board will raise the cash rate again. Bullock described inflation as likely to exceed the August base case, but did not quantify the expected difference or specify how long the upward pressure might persist.
The eventual effect of the Middle East conflict on energy prices and economic activity remains uncertain. Bullock said the impact on activity had been relatively modest so far, while the full effects of recent rate rises were still to come through. The statement also does not provide detailed figures for the latest unemployment movement or a new assessment of how much spare capacity remains in the economy.
Committee Questions and Updated Outlook
Bullock and her colleagues were appearing to answer questions from the Senate Economics Legislation Committee. The hearing was also due to cover the RBA’s payments-system work and cash distribution, in line with the Governor’s opening remarks.
The next key indicator in the statement’s account is an updated RBA assessment of inflation and activity. Until new projections or Board decisions are published, the August forecast remains the latest quantified outlook identified in the source material; the Governor’s remarks indicate that its inflation assumptions have become less favourable.
Key Questions
What did the RBA governor tell the Senate committee?
Michele Bullock said inflation risks had increased since the RBA’s August forecasts and that inflation was likely to be higher than the August base case. She cited energy costs, global price pressures and domestic capacity constraints.
How much has the cash rate target risen this year?
Bullock said the Board had raised the cash rate target by 100 basis points in total this year, including a 25-basis-point rise since the committee’s previous hearing in June.
What is the RBA’s inflation target?
The RBA aims to return inflation to the midpoint of a 2–3 per cent target range, while taking its full-employment objective into account.
When did the RBA expect inflation to return to target?
The August Statement on Monetary Policy forecast a return to around the midpoint of the target range in late 2027. Bullock said subsequent developments suggested inflation would likely be higher than that forecast’s base case, but did not give a replacement date.
Did Bullock announce another rate rise?
No. Her statement explained the inflation outlook and the increases already made, but did not announce a new rate decision or specify whether further increases would follow.
Source: bis.org
