Appearing before federal MPs in Canberra on 18 September, Governor Michele Bullock described a labour market that remains strong by historical standards, even as she warned that inflation would take until late 2027 to settle near the middle of the target.

Parliamentary hearings rarely produce surprises, but they do give the Governor of the Reserve Bank a chance to set out the big picture in her own words. When Michele Bullock delivered her opening statement to the House of Representatives Standing Committee on Economics on 18 September, one line about employment stood out: "the share of the population with a job is close to a record high."

It was a reminder that, for all the talk of slowing growth and rising interest rates, a very large proportion of Australians are in work. It also helps explain why the Monetary Policy Board went on to lift the cash rate target to 4.60 per cent just 11 days later.

What Bullock told the committee

The Governor's assessment of the jobs market was upbeat. "The unemployment rate – at 4.5 per cent – is low by historical standards," she said. That figure was the latest available at the time; by her 29 September media conference she was citing 4.6 per cent.

She paired the employment message with a frank account of the inflation challenge. Bullock told MPs: "Over the past year, both headline and underlying measures of inflation were around or a little above 3½ per cent." She noted that "Inflation fell significantly from its peak of 7.9 per cent at the end of 2022", but added that "inflation will not return to around the midpoint of the target range until late 2027."

The committee also heard about housing, oil and technology. Bullock said "housing prices are still around 50 per cent higher than they were in early 2020," and that "Housing prices have fallen in most capital cities and new housing loans have declined." On energy, she said: "Oil and related prices have increased sharply again and will add directly to inflation." On artificial intelligence, she observed that "The global AI boom is driving stronger growth in economies that are key parts of the AI supply chain."

Why the share of people in work matters

The unemployment rate gets most of the headlines, but it only measures people who are in the labour force — working or actively looking for work. The share of the population with a job captures something broader: how much of the adult population is employed at all.

When that share sits close to a record, it suggests that jobs remain widely available, even if the unemployment rate has edged up. The two measures can move in different directions. If more people enter the labour force looking for work than the number of new positions created, unemployment can rise while the proportion of the population in employment stays high.

That fits the picture Bullock painted at her later media conference, where she said "the unemployment rate has risen from 3.5 per cent over the past couple of years to 4.6 per cent" but also that "there's been over a million jobs created." Her summary: "it doesn't mean job losses."

A strong jobs market meets weak productivity

From the RBA's point of view, a jobs market this robust is good news for households but complicates the inflation fight. Bullock's statement to the committee spelled out the constraint: "Continued weak productivity growth means that the economy cannot grow strongly without putting pressure on inflation."

Put simply, when output per worker is barely improving, the economy's speed limit is lower. Strong demand for labour and goods then tends to show up in prices rather than in extra production. At her 29 September media conference, Bullock went further: "The bottom line is that productivity is doing nothing." She also said that "monetary policy can't do anything about productivity," and that "The best thing we can do for productivity is get inflation low and stable".

The inflation figures underline why this matters. Headline inflation, measured by the monthly CPI indicator, was 4.0 per cent over the year to August, and the quarterly headline measure was 3.9 per cent over the year to the June quarter. Underlying inflation, measured by the trimmed mean, was 3.6 per cent in the June quarter; Bullock later described it as "about 3.5 per cent". All of those are above the 2–3 per cent target range and its 2.5 per cent midpoint.

The RBA's August Statement on Monetary Policy also pointed to labour costs, describing unit labour cost growth of 3.3 per cent over the year to the March quarter as elevated.

Eleven days later: the September hike

The Monetary Policy Board met shortly after the hearing and, on 29 September, unanimously raised the cash rate target by 25 basis points to 4.60 per cent. It was the fourth increase of 2026, following moves in February, March and May, and a hold in August.

The Board's statement said inflation remains elevated, that some upside risks flagged in August were materialising, and that recent inflation outcomes had been stronger than expected. It described the labour market as having eased broadly as expected, while noting capacity pressures in the economy and that firms were raising or planning to raise prices.

Bullock put it directly at the media conference: "Inflation is too high and has been driven by domestic capacity pressures." A labour market that keeps a near-record share of the population employed is, in that framing, one of the sources of those pressures — even as it is welcome news for workers.

The August forecasts, which were prepared with a cash rate assumption of around 4.3 to 4.5 per cent and therefore pre-date the September increase, had the unemployment rate rising gradually to 4.8 per cent by mid-2028, while employment kept growing at a little over 1 per cent a year.

The bottom line

Bullock's parliamentary testimony captured the tension at the heart of the RBA's task in 2026. A near-record share of Australians are in work and the unemployment rate remains low by historical standards — yet with productivity weak and inflation above target, that strength adds to price pressures.

The Board has not committed to any particular path from here. Bullock said at her media conference, "I'm not going to give you forward guidance," and the Board has said it will increase the cash rate further if needed while remaining attentive to the data. The September minutes are due on 13 October, the next CPI release is on 28 October, and the next decision will be announced at 2.30 pm on 3 November.