Economic Buzz: RBA Governor says underlying inflation is still expected to be higher

Michele Bullock, Governor of the Reserve Bank of Australia (RBA) has stated that world has been more shock-prone in recent years, but the economy is more resilient than it was in the past. The adoption of credible inflation targets by central banks – to keep inflation low and stable – has played a key role in our improved resilience. Following a once-in-a-century pandemic, economies around the world experienced inflation outcomes that few current central bankers had encountered in their professional lives. Australia was no different. Demand and employment outcomes remained strong.

She noted that in Australia, inflation declined significantly from its peak and underlying inflation also moderated in 2024 and 2025. RBA forecasts at the time suggested inflation would return sustainably to target over time. This marked important progress in restoring price stability after a period of global disruption. Inflation has since increased and is now above target. Indeed, it was rising and above target even before the recent oil price rises.

The global environment has changed and the outlook is uncertain. While this makes the task of monetary policy more complex, the RBA remains focused on delivering price stability and full employment. The full effects of increases in the cash rate from earlier in the year will take time to materialise. And even if the renewed disruption to oil supply abates quickly, underlying inflation is still expected to be higher as fuel price rises flow through to other prices.

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