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RBA Governor Michele Bullock told the Senate Economics Legislation Committee on 28 October that inflation is likely to run higher than the central bank forecast in August. She cited renewed Middle East energy-price pressures and persistent domestic capacity constraints; the RBA had raised its cash rate target by 25 basis points since the June hearing, taking this year’s cumulative increase to 100 basis points.
In her opening statement to the Senate Economics Legislation Committee’s supplementary budget estimates hearing, Bullock said the Monetary Policy Board raised the cash rate target with the aim of returning inflation to target. The RBA’s target range is 2–3 per cent, and the board aims to bring inflation back to its midpoint while also considering its full-employment objective.
Inflation fell 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, after monetary policy tightened substantially in 2022 and 2023. It picked up again in the second half of 2025 and has remained above target. Bullock said recent year-ended inflation had been around 3½ to 4 per cent.
The RBA’s August forecasts had inflation returning to around the midpoint of the target range in late 2027. Bullock said developments since that forecast suggested inflation would probably be higher than the bank’s base case. The statement does not give a new numerical forecast or announce a further rate decision.
Higher Inflation Could Delay Relief
The governor’s assessment signals that the RBA sees a tougher path back to its inflation target than it expected in August. If inflation stays elevated, households and businesses could face continued price pressure, while monetary policy may need to remain restrictive for longer. Bullock stressed that rate changes affect activity with a lag, so the full impact of recent increases has yet to be felt.
For readers, the key distinction is that the statement is an outlook and explanation of policy, not a new rate announcement. The committee hearing gives lawmakers an opportunity to question the central bank about its decisions and responsibilities. The RBA’s objectives include low and stable inflation and full employment, alongside financial stability and its payments and banking-service functions.
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From Rate Rises to Revised Risks
The RBA’s Monetary Policy Board sets monetary policy with the aim of returning inflation to the midpoint of its 2–3 per cent target range, while allowing flexibility over timing to account for full employment. Bullock said keeping inflation above target for too long risks it becoming embedded in expectations and influencing wage- and price-setting.
At the time of the August board meeting, the RBA judged risks to its inflation outlook to be tilted upwards. Since then, Bullock said, some international and domestic risks had materialised or were emerging. She described the economy’s growth as slowing as expected, but said household spending growth was moderating only gradually and business investment had picked up strongly, mostly due to data-centre spending.
The statement also covered the RBA’s wider responsibilities, including the payments system and cash distribution. Its main focus, however, was the inflation outlook and the reasoning behind monetary policy decisions since the committee’s previous hearing in June.
“Inflation will therefore likely be higher than was our base case in August.”
— Michele Bullock, RBA governor, in her opening statement
Forecast Details Still Pending
The statement does not provide a revised inflation forecast, a new estimate for when inflation will return to target, or a decision on the cash rate beyond the increase already described. It is also unclear how long the conflict in the Middle East and the associated energy-price pressure will persist, or how much of the higher costs businesses will pass on to consumers.
Bullock said unemployment had recently risen a little more than the RBA expected, while the labour market nevertheless appeared somewhat tighter than the bank had previously assessed. The statement does not quantify the expected effects of the competing pressures on employment, household spending or future policy decisions.
Committee Questions and RBA Outlook
Bullock and her colleagues appeared to answer questions from committee members after the opening statement. The hearing was an opportunity for senators to examine the RBA’s rate decisions, inflation assessment and work across its other responsibilities.
The next key information will come through subsequent RBA communications, including updated economic forecasts and any Monetary Policy Board decisions. Until the bank publishes updated projections, the August forecast remains the latest numerical outlook described in the supplied statement; Bullock’s warning indicates the risks have since shifted, not that a new forecast has been issued.
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 global cost pressures and domestic capacity constraints.
Did the RBA announce a new interest-rate increase at the hearing?
No. The statement says the board had raised the cash rate target by 25 basis points since the June hearing, taking the cumulative increase this year to 100 basis points. It does not announce a further increase.
What is the RBA’s inflation target?
The RBA aims to return inflation to the midpoint of its 2–3 per cent target range, while also considering its full-employment objective.
Why does the RBA expect inflation to be higher than forecast?
Bullock pointed to renewed Middle East-related energy costs, other global pressures and continuing domestic capacity constraints. She also cited weak productivity growth as a factor limiting growth without adding inflation pressure.
When does the RBA now expect inflation to return to target?
The statement gives no revised date. The latest published forecast it references, from August, had inflation returning to around the target midpoint in late 2027; Bullock said the outlook was now likely higher than that forecast’s base case.
Source: bis.org
