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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, citing renewed energy-price pressures and domestic capacity constraints. The Monetary Policy Board has raised the cash rate by 100 basis points in total this year, including a 25-basis-point increase since the committee’s June hearing.
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 RBA’s August forecast, as renewed global energy costs add to domestic price pressures. She said the Monetary Policy Board has lifted its cash rate target by 100 basis points this year, including a 25-basis-point rise since the committee’s previous hearing in June.
In her opening statement, delivered by videoconference, Bullock said the board sets monetary policy with the aim of returning inflation to the midpoint of its 2–3 per cent target range, while also pursuing full employment. She said inflation had fallen from a peak of 7.9 per cent at the end of 2022 and sat within the target range for a period in 2024 and 2025, before picking up in the second half of 2025. It has since remained above target, at around 3.5 to 4 per cent in year-ended terms.
Bullock said the rise reflected both persistent capacity pressures in Australia and global cost pressures linked to the conflict in the Middle East. Oil and related prices had risen sharply again since the RBA’s August forecasts, she said, adding that higher fuel and transport costs could affect prices directly and as businesses pass on increased expenses. The AI boom and extreme weather were also contributing to upward pressure on some technology-related and agricultural prices, according to the statement.
The governor said the RBA’s August forecasts had pointed to inflation returning to around the target midpoint only in late 2027. Developments since then, she said, suggested some international and domestic risks had materialised or were materialising, making inflation likely to run above the August base case. She also said growth was slowing as expected, but that subdued growth in aggregate demand would be needed to ease capacity pressures. The full effects of recent rate rises have yet to be felt because monetary policy operates with a lag.
Higher Inflation Risks Shape Rate Policy
The statement signals that the RBA sees a more difficult path back to its inflation target than its August central forecast suggested. If inflation remains elevated, the board may need to keep monetary policy restrictive for longer or consider further action; Bullock did not announce a new rate decision in this opening statement. The cumulative 100-basis-point rise this year already represents a significant tightening of borrowing conditions, although the statement does not quantify its effects on individual households or businesses.
For households, higher energy and transport costs can reduce the purchasing power of income and feed into the prices of goods and services. The RBA also pointed to weak productivity growth as a constraint: in Bullock’s account, the economy cannot sustain strong growth without adding to inflation pressure while productivity remains weak. The committee hearing gives lawmakers an opportunity to question the central bank about how it weighs price stability against employment and economic activity.
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Inflation Rebounded After Earlier Decline
The RBA’s inflation objective is to return inflation to the midpoint of a 2–3 per cent range, while allowing flexibility over the timing to balance that objective with full employment. Bullock said inflation had eased substantially from its late-2022 peak following monetary tightening during 2022 and 2023. It was within the target range for part of 2024 and 2025, but rose again in the latter half of 2025.
At the committee’s previous hearing with the RBA in June, the board had not yet made the rate increase Bullock described in this statement. Since then, the cash rate target has risen by 25 basis points; the total increase for the year is 100 basis points. The August Statement on Monetary Policy is the forecast reference Bullock cited. Her remarks on 28 October indicate that conditions have changed since those projections, particularly for global energy prices and some domestic inflation pressures.
The committee hearing also covers responsibilities beyond monetary policy. Bullock said the RBA’s remit includes supporting a reliable and competitive payments system, providing banking services to government agencies, and supplying secure banknotes. She said she and her colleagues were attending to answer committee members’ questions, and planned to address payments and cash distribution after discussing the economy.
“The full effects of recent rate increases are yet to be felt on domestic activity.”
— Michele Bullock, RBA governor
Forecast Path Still Subject to Change
Bullock’s opening statement did not provide a new numerical inflation forecast or specify how much higher inflation might be than the August projection. It also did not announce a further cash rate decision or give a timetable for any future change. The next published forecasts and the board’s subsequent decisions will show how the RBA translates the risks described in the statement into its outlook.
The statement identifies the Middle East conflict, global energy prices, AI-related supply constraints, extreme weather and domestic capacity pressures as influences, but does not quantify each factor’s contribution. Bullock said the labour market appeared somewhat tighter than the RBA had previously judged, despite a recent rise in unemployment that was larger than expected. The extent and duration of these pressures remain uncertain. The supplied statement also ends during its discussion of household spending and business investment, so it does not establish the full detail of the governor’s remarks on activity or the payments-system update.
Committee Questions and RBA Forecasts
Bullock and her colleagues were appearing to answer questions from senators at the supplementary budget estimates hearing. The committee’s questioning can test the reasoning behind the rate increases, the inflation outlook and the RBA’s assessment of economic conditions. Bullock said she would also provide an update on the payments system and cash distribution, matters within the central bank’s broader responsibilities.
The next key information will come from the RBA’s subsequent monetary policy decisions and updated forecasts. Those will indicate whether the inflation pressures described on 28 October persist and how the board assesses their implications for demand, employment and the cash rate. No specific date for a new forecast or rate decision was given in the opening statement.
Key Questions
What did the RBA governor tell the Senate committee?
Governor Michele Bullock said on 28 October that inflation is likely to be higher than the RBA’s August base-case forecast, citing increased global energy costs and ongoing domestic capacity pressures.
How much has the cash rate target risen this year?
Bullock said the Monetary Policy Board has increased the cash rate target by 100 basis points in total this year. One 25-basis-point increase came after the committee’s previous RBA hearing in June.
Why does the RBA say inflation is rising?
The governor attributed pressure to a combination of domestic capacity constraints and global costs, including energy prices linked to the Middle East conflict. She also cited price pressures affecting some agricultural and technology-related goods.
Did Bullock announce another rate rise?
No. The opening statement discussed the existing rate increases and inflation risks, but did not announce a new cash rate decision.
When does the RBA expect inflation to return to target?
The August forecast cited by Bullock projected inflation returning to around the midpoint of the target range in late 2027. She said subsequent developments suggest inflation may be higher than that forecast’s base case; the statement did not give a revised return date.
Source: bis.org
