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Reserve Bank of Australia Governor Michele Bullock told a Senate committee on October 28 that inflation is likely to be higher than the RBA’s August forecast, citing renewed Middle East conflict, higher energy prices and domestic capacity pressures. The Monetary Policy Board has raised the cash rate by 25 basis points since its previous hearing in June, bringing this year’s cumulative increase to 100 basis points.
Reserve Bank of Australia Governor Michele Bullock told the Senate Economics Legislation Committee on October 28 that inflation is likely to be higher than the central bank’s August forecast, as renewed conflict in the Middle East lifts energy costs and domestic capacity pressures persist. She said the Monetary Policy Board had raised the cash rate target by 25 basis points since the committee’s June hearing, taking the cumulative increase this year to 100 basis points.
In her opening statement, delivered by videoconference, Bullock said the Board’s monetary policy objective is to return inflation to the midpoint of its 2–3 per cent target range, while also taking account of full employment. The RBA’s August forecasts had indicated inflation would return to around that midpoint in late 2027. Developments since then, she said, point to inflation being higher than that base case.
Bullock attributed the changed outlook to a combination of international cost increases and domestic pressures. The renewed Middle East conflict has pushed global energy prices above the levels assumed in the August forecast. Higher oil prices can add to inflation directly and through transport and other costs that businesses may pass on. She also cited elevated short-term inflation expectations, weather-related pressures on agricultural prices and stronger demand for supply-constrained technology linked to the global artificial intelligence boom.
Domestic conditions remain part of the inflation problem, the governor said. Although unemployment had risen somewhat more than expected and demand growth was slowing, the labour market appeared tighter than the RBA had previously assessed. Bullock pointed to underlying price pressures and weak productivity growth as reasons the economy could not expand strongly without adding to inflation. The full effect of recent rate rises has yet to work through economic activity, she said.
Higher Inflation Could Extend Rate Pressure
The revised inflation outlook matters because it may require monetary policy to remain restrictive for longer, or prompt further action if price pressures persist. Bullock did not announce a new rate decision in the opening statement, but said a period of subdued aggregate-demand growth was needed to ease capacity constraints and bring inflation down sustainably. Rate changes affect borrowers and businesses over time, while higher inflation reduces household purchasing power if wages and incomes do not keep pace.
The governor also stressed that the challenge is not limited to fuel or imported costs. Domestic demand pressures and weak productivity are affecting the economy’s ability to grow without generating inflation. That means international energy prices are adding to an existing challenge, rather than being presented as its sole cause.
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Inflation and Rate Decisions Since June
Bullock said inflation had fallen from a peak of 7.9 per cent at the end of 2022 to within the target range for a period in 2024 and 2025, following substantial monetary tightening in 2022 and 2023. Inflation then picked up in the second half of 2025 and remained above target. In the statement, she described recent year-ended inflation as around 3½ to 4 per cent.
The Board’s stated framework allows some flexibility in the timing of a return to target so it can balance price stability with full employment. Bullock cautioned that inflation staying above target for too long could affect expectations and feed into decisions about prices and wages. She also said central banks in other advanced economies were raising rates or signalling readiness to do so if needed.
Alongside monetary policy, the committee hearing covered the RBA’s wider responsibilities. Bullock said she would also update senators on the payments system and cash distribution, as well as the bank’s work supporting government banking services and providing banknotes.
“Inflation will therefore likely be higher than was our base case in August.”
— Michele Bullock, RBA governor, in her October 28 opening statement
Forecast Risks and Rate Path
The statement does not give a new numerical inflation forecast or specify when inflation might return to the target midpoint under the changed conditions. The RBA’s latest published forecast cited by Bullock was the August outlook, which projected a return around late 2027; she said subsequent developments made inflation likely to be higher than that forecast’s base case.
It also remains unclear how long the Middle East conflict and higher energy prices will persist, how much of the added cost businesses will pass on, and how strongly recent rate increases will restrain demand. Bullock did not say whether the Board would raise rates again. The opening statement provides the central bank’s assessment, not a new decision or a guaranteed policy path.
Committee Questions and RBA Updates
Bullock and her colleagues were appearing before the Senate Economics Legislation Committee to answer questions at its supplementary budget estimates hearing. The governor said she would address the economic outlook and recent monetary policy decisions before providing updates on payments and cash distribution. Further detail may emerge through her responses to senators, but the statement does not set out a date for the Board’s next rate decision.
Readers will be watching for subsequent RBA forecasts and inflation data to show whether energy and domestic pressures continue to push prices higher, and whether demand slows enough to ease capacity constraints. Until those developments are assessed, the bank’s August forecast remains its latest published numerical outlook, while Bullock’s statement signals that risks have shifted upward.
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 higher global energy costs and continuing domestic capacity pressures.
How much has the cash rate risen this year?
Bullock said the Monetary Policy Board’s increase since the committee’s June hearing was 25 basis points, bringing the cumulative increase this year to 100 basis points. The statement does not provide the cash rate’s level.
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 balancing that objective with full employment.
Did Bullock announce another interest-rate rise?
No. The opening statement discussed the outlook and prior decisions but did not announce a new rate decision or say whether the Board would raise rates again.
Why does the RBA expect inflation to remain elevated?
Bullock cited higher energy and other global costs, along with domestic capacity pressures, a labour market that appeared tighter than previously judged, and weak productivity growth.
Source: bis.org
