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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. She cited renewed Middle East conflict and higher energy prices, alongside domestic capacity pressures; 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 be higher than the RBA expected in August, pointing to renewed global energy-cost pressures and continuing domestic capacity constraints. Her statement comes after the Monetary Policy Board raised the cash rate target by 25 basis points since the committee’s June hearing, bringing increases this year to 100 basis points.
Bullock said inflation had fallen from a peak of 7.9 per cent at the end of 2022 and was within the RBA’s 2–3 per cent target range for a period during 2024 and 2025. It picked up again in the second half of 2025, she said, and has since remained above target, running at around 3½ to 4 per cent year over year.
The RBA’s August forecasts had inflation returning to around the midpoint of its target range in late 2027. Bullock said developments since then pointed to inflation being higher than that forecast’s base case. The Middle East conflict has re-escalated, and global energy prices are substantially higher than assumed in the August outlook. Higher oil prices can add to inflation directly and through transport and other costs that businesses may pass on, she said.
She also pointed to higher prices for some agricultural and technology-related goods, linked in part to extreme weather and demand associated with the global artificial-intelligence boom. Bullock said domestic pressures remained a separate part of the problem: underlying inflation was elevated, the labour market appeared somewhat tighter than the bank had judged earlier, and weak productivity growth limited how quickly the economy could expand without adding to inflation.
Why the Inflation Outlook Shifted
The assessment matters because it suggests Australians may face a longer period of above-target inflation than the RBA had projected in August. Bullock said inflation should return to the midpoint of the 2–3 per cent target range, while the bank also considers its full-employment objective. If inflation remains elevated, the RBA has said it risks becoming embedded in expectations and influencing price- and wage-setting.
The governor did not announce a new rate decision in this opening statement. But her account describes a more difficult policy outlook: global cost shocks are adding to existing domestic demand and capacity pressures, while the impact of earlier interest-rate rises is still working through the economy. The statement gives lawmakers and the public the RBA’s current explanation of those pressures; it does not specify what the Board will decide at a future meeting.
Higher borrowing costs can weigh on household spending and business activity, while inflation erodes purchasing power if incomes do not keep pace. Bullock said subdued growth in aggregate demand was needed to ease capacity pressures and bring inflation down sustainably. The balance between that restraint and employment and economic activity is central to the RBA’s stated policy objectives.
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From Target-Range Relief to Renewed Pressure
The RBA’s monetary policy target is to return inflation to the midpoint of its 2–3 per cent range, while allowing flexibility over the timeframe to account for full employment. Bullock said a substantial tightening of policy during 2022 and 2023 helped bring inflation down from its late-2022 peak. Inflation was within the target range for part of 2024 and 2025, before rising again in the second half of 2025.
At its August meeting, the Board judged risks to its inflation outlook to be tilted upward. The August Statement on Monetary Policy projected a return to around the target midpoint in late 2027. In her committee statement, Bullock said some domestic and international risks had since materialised or were emerging, including a renewed energy-price shock and persistent domestic capacity constraints.
The committee appearance was a supplementary budget estimates hearing, held by videoconference on 28 October. Bullock said she and her colleagues were there to answer senators’ questions. She also outlined the RBA’s wider responsibilities, including payments-system oversight, banking services for Australian government agencies, and the provision and distribution of banknotes.
“Inflation will therefore likely be higher than was our base case in August.”
— Michele Bullock, RBA governor
Forecast Risks Still Developing
Bullock’s statement does not provide a revised numerical inflation forecast or say how much higher inflation may run than the August projections. The timing and scale of energy-price effects also remain uncertain, including how much businesses pass higher costs on to consumers and how persistent those increases prove to be.
The statement says the impact of the Middle East conflict on economic activity had been relatively modest so far, but does not quantify its future effects. Nor does it set out a specific future cash-rate path. Bullock noted that monetary policy works with a lag, so the full effects of recent rate increases have yet to be felt in domestic activity.
She also said household spending growth had been moderating only gradually and business investment had picked up strongly, driven mostly by data-centre spending in the material provided. The statement does not give figures for those trends or explain how they may alter the next set of forecasts. The full hearing record and responses to senators’ questions could add detail beyond the opening remarks.
Committee Questions and RBA Forecasts
Bullock and her colleagues were appearing to answer questions from the Senate Economics Legislation Committee. The next immediate development is the committee’s examination of the RBA’s outlook and responsibilities, including the effects of higher energy costs, domestic inflation pressure, and the timing of monetary policy’s impact on demand.
Readers can compare the governor’s remarks with the RBA’s next published economic forecasts and subsequent Monetary Policy Board decisions. The statement itself does not give a date for a revised forecast or indicate what the Board will decide next. Until updated projections are released, late 2027 remains the return-to-midpoint timing in the August forecast, while Bullock’s latest remarks signal that the outlook has worsened.
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 energy costs and domestic capacity pressures.
How much has the cash rate target risen this year?
Bullock said the Monetary Policy Board’s increases total 100 basis points this year. Since the committee’s previous RBA hearing in June, the Board had raised the target by 25 basis points.
What is the RBA’s inflation target?
The RBA aims for inflation to return to the midpoint of a 2–3 per cent target range, while also considering its full-employment objective.
When did the August forecast project inflation returning to target?
The RBA’s August forecast projected inflation would return to around the target midpoint in late 2027. Bullock said inflation is now likely to be higher than that forecast’s base case; she did not provide a revised date or numerical forecast in the opening statement.
Did Bullock announce another interest-rate increase?
No. The opening statement described the outlook and previous rate decisions but did not announce a new cash-rate decision or state a specific future rate path.
Source: bis.org
