Key Highlights

The Governor said business investment has picked up, mainly in data centres and renewable energy.

Investment adds to demand today and can lift capacity over time, at a time when productivity growth is low.

The October Financial Stability Review reported business credit growth running above its post-global financial crisis average for a couple of years.

Reserve Bank Governor Michele Bullock told a Senate committee on 28 October 2026 that business investment has picked up, led by data centres and renewable energy, adding a new dimension to the RBA's assessment of demand in the economy.

When the Reserve Bank of Australia (RBA) discusses inflation, attention usually falls on households: how much they are spending, what they are paying for petrol and power, and how their mortgages are holding up. But in her opening statement to the Senate Economics Legislation Committee at Supplementary Budget Estimates on 28 October 2026, Governor Michele Bullock singled out another part of the economy.

Business investment, she said, has picked up, mainly in data centres and renewable energy.

It was a brief remark in a wide-ranging statement, yet it sheds light on how the RBA views the balance between demand and supply, and why the Bank considers that balance central to its inflation outlook.

The Governor's statement placed the investment pick-up alongside several other observations about the domestic economy. She said household spending growth is moderating only gradually. She said the labour market appears slightly tighter than previously judged, "Despite the unemployment rate recently rising a little more than we had expected". And she pointed to low productivity growth, which she said means the economy cannot grow rapidly without adding to inflation pressure.

Taken together, these points describe an economy where demand is holding up in several areas at once. The RBA has been explicit about the consequences. "we still see inflation arising from domestic capacity pressures," the Governor told senators.

Why investment matters for inflation

Investment occupies an interesting position in the RBA's thinking. In the short run, businesses building data centres or renewable energy projects need labour, equipment, materials and services. That spending adds to overall demand in the economy, much as household consumption does.

Over the longer run, investment can expand what the economy is able to produce. New capacity, new technology and new energy infrastructure can lift productive potential, which in principle allows the economy to grow faster without generating as much inflation.

That tension is relevant given what the RBA has said about productivity. If the economy cannot grow rapidly without adding to inflation pressure, then any jump in demand, including from investment, has to be weighed against the economy's limited capacity to meet it in the near term.

Assistant Governor (Economic) Sarah Hunter described the challenge in similar terms during an interview on 60 Minutes broadcast on 25 October 2026. She identified two problems facing the RBA: an overseas oil shock, and excess domestic demand relative to sustainable supply.

The AI connection

The Governor's reference to data centres connects to a broader theme in the RBA's recent commentary: artificial intelligence.

In her Senate statement, Governor Bullock listed AI-related demand among the global cost pressures affecting Australian inflation, alongside the Middle East conflict and extreme weather. AI therefore appears in the RBA's analysis in two ways: as a driver of investment at home, and as a source of global demand that may be feeding into costs.

The RBA's Financial Stability Review, released on 1 October 2026, offered a further perspective. It noted: "Optimism around AI is boosting asset prices and has considerable potential to improve productivity and resilience."

AI-related optimism is lifting asset prices, which is relevant to financial stability. At the same time, the technology carries potential to improve productivity, which could ease some of the supply constraints the Governor described.

Governor Bullock also reflected on technology in her University of New England graduation speech in Armidale on 23 October 2026. Discussing judgement, integrity, adaptability and collaboration, she said: "Those are qualities that technology can support, but not replace."

Renewables and the energy picture

Renewable energy is the second focus of the investment pick-up the Governor described. Energy is a prominent theme across the RBA's current concerns.

The September 2026 Consumer Price Index, released by the Australian Bureau of Statistics (ABS) on 28 October 2026, showed electricity prices up 12.8 per cent over the year, mainly because Commonwealth electricity rebates ended. Automotive fuel prices rose 23.6 per cent annually, driven by higher world oil prices.

The RBA has highlighted energy as a key upside risk. Governor Bullock told senators that "global energy prices are now much higher than had been assumed in the August forecasts", adding: "Inflation will therefore likely be higher than was our base case in August."

The Governor's statement did not quantify how much renewable investment is under way, nor did it link that investment directly to current electricity prices. What it does show is that energy features both as a source of price pressure and as an area of rising business spending.

Business credit and the rate outlook

The investment pick-up sits alongside growing lending to business. The October 2026 Financial Stability Review reported that business credit growth has been running above its post-global financial crisis average for a couple of years.

The same review noted that business insolvencies are around their longer-run average, though elevated in hospitality, construction and transport. That suggests the pick-up in business activity is not evenly spread across all sectors.

The review also observed: "The principal risks are increasingly coming from abroad." It concluded that "Australian banks are well positioned to continue lending, even in a downturn".

Headline inflation rose 4.3 per cent in the 12 months to September 2026, according to the ABS, with the trimmed mean measure of underlying inflation at 3.6 per cent. Both are above the RBA's 2–3 per cent target range.

The Monetary Policy Board lifted the cash rate target by 25 basis points to 4.60 per cent in September, its fourth increase of 2026. Its decision statement said the Board would be "attentive to the data and the evolving assessment of the outlook and risks", with options "including increasing the cash rate target further if needed".

Business investment is one of many inputs the Board will weigh. Its next decision is due on 3 November 2026 at 2.30 pm AEDT, alongside an updated Statement on Monetary Policy. That decision has not yet been made.

The bottom line

Governor Bullock's remark to senators that business investment has picked up, mainly in data centres and renewable energy, adds to a picture of demand holding up across the economy at a time when productivity growth is low. Investment of this kind can lift capacity over time, but in the near term it also adds to demand.

For readers tracking the RBA, the investment theme is worth knowing about because it links several of the Bank's concerns at once: AI, energy and the economy's capacity to grow without adding to inflation.