Highlights

  • Bullock told senators on 28 October that high inflation hurts everyone and that the Board cannot allow it to persist.
  • She acknowledged that mortgage holders are directly impacted and hurt by the current level of interest rates.
  • Scheduled mortgage payments were about 10% of household disposable income, near the 2024 peak, the September minutes showed.
  • Wages are not driving the current cost pressures, Bullock said, meaning real wage growth remains constrained despite nominal increases.

In her opening statement to the Senate Economics Legislation Committee on 28 October 2026, Governor Michele Bullock made the RBA's central argument for its rate path in six words: "High inflation hurts everyone." She followed it with the Board's frank acknowledgment of the trade-off: the people carrying mortgages are hurting, and the RBA is deliberately adding to that pressure in the near term to avoid a larger and more widespread cost later.

The Acknowledgment and the Argument

Bullock did not soften the human cost in her Senate statement. She said: "Those who have mortgages, yes, this clearly impacts them and it hurts them." She went further at an earlier media appearance, framing the trade-off in terms that Sarah Hunter also used on 60 Minutes: "it's not pain-free, it's not costless, but the cost of it is less using interest rates than it would be using other tools."

The argument is that the alternative, allowing high inflation to persist and become embedded in expectations, would impose a more widespread and more lasting cost. Every household that buys goods or services pays more when inflation is high. Lower-income households, who spend a higher share of their income on necessities, are hurt disproportionately.

What the Data Shows About Borrower Stress

The September minutes recorded that scheduled mortgage repayments were about 10% of aggregate household disposable income, near the peak reached in 2024. Fewer than 2% of owner-occupier borrowers were estimated to be in a cash flow shortfall. Savings buffers ranged from just under one year of repayments for those in the lowest income quintile to almost two years for the highest.

Bullock described the 2% figure as "small." She has also been explicit that monetary policy does not target housing prices, and the October 2026 Financial Stability Review noted that most borrowers have positive equity despite price falls in most capital cities.

Why Embedding Matters More Than the Current Level

Bullock's Senate statement included the sentence: "The Board remains focused on ensuring that high inflation does not become embedded." The minutes recorded that members "considered it prudent to reinforce the anchoring of inflation expectations." Once inflation expectations become embedded, reducing inflation requires more aggressive tightening, sustained for longer, to shift both the price level and expectations. The Board's assessment is that acting now imposes a concentrated cost, while failing to act risks a more diffuse and persistent one.

She also noted the wages dynamic: "Rises in wages are not driving these cost pressures." And separately: "there's not going to be real wage rises coming down the pipeline" because of weak productivity. The cost of high inflation therefore compounds: prices rise, real wages do not keep pace, and purchasing power falls.