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When Governor Michele Bullock listed what is pushing prices up, she named three forces side by side: the Middle East conflict, the artificial intelligence boom and extreme weather.

Most discussion of Australia's inflation problem in 2026 has centred on two global stories: oil and technology. Conflict in the Middle East has lifted energy costs, while the worldwide rush to build artificial intelligence capacity has pushed up the cost of certain technology-related goods. Both themes feature heavily in the Reserve Bank of Australia's recent communication.

But a third item has joined the list. In her opening statement to the House of Representatives Standing Committee on Economics on 18 September, Governor Bullock said: "The Middle East conflict, the AI boom and extreme weather events are contributing to upward pressure on a range of energy, agricultural and technology-related prices."

That one sentence is a useful map of where the central bank sees price pressure coming from. It names three sources and three broad categories of prices, and it sets the backdrop against which the Monetary Policy Board lifted the cash rate target by 25 basis points to 4.60 per cent on 29 September.

Three pressures, one sentence

The Governor's sentence is notable for what it groups together. Energy, agricultural and technology-related prices are very different parts of the economy, and the forces she named are very different in nature: a geopolitical conflict, an investment boom, and the weather.

What they share is that they are largely outside the RBA's control. The central bank cannot settle a conflict, set the pace of global technology spending or change the weather. What it can influence is the level of demand in the Australian economy, and, through that, the chance that higher prices in some areas spread into broader, more persistent inflation.

The Governor did not, in that statement, put a number on how much each factor is contributing. Her point was that several separate sources of upward pressure are operating at the same time, in an economy where, as she told the committee, "Inflation is too high."

Oil and AI: the familiar pair

Of the three, energy has drawn the most attention in the RBA's latest decision. The Board's statement of 29 September said: "The conflict in the Middle East has broadened and global energy prices are now much higher than had been assumed in the August forecasts."

It added: "Global oil supply disruptions are maintaining upward pressure on global and domestic energy prices and inflation." The statement also observed that "Higher fuel prices have partially been passed through to prices of other goods and services." The Financial Stability Review, released on 1 October, noted that energy prices rose sharply again in September in response to developments in the Middle East.

The technology pressure comes from a very different direction. The Board's statement said: "AI-related demand is driving rapid growth in global prices for technology-related goods." At her media conference on 29 September, Bullock put it this way: "The global AI investment boom has driven significant price rises for some inputs within the AI supply chain."

Deputy Governor Andrew Hauser, speaking on ABC's 7.30 on 8 September, described AI spending in fairly traditional terms. To generate the benefits, he said, "you first have to put in place the kit" — a "fairly conventional investment boom". The RBA's statement separately noted that "Growth in business investment and debt is strong."

Extreme weather: the newest name on the list

The third factor is the least discussed, and the RBA's recent material says little about it in detail. The key reference is the Governor's sentence to the committee, which places extreme weather events alongside the conflict and the AI boom as contributors to upward pressure on prices, a list that includes agricultural prices.

Its inclusion matters for the RBA largely because of inflation expectations. The Board's statement noted that "Short-term measures of inflation expectations remain elevated." Bullock explained the concern at her media conference: "It's critical that we stop expectations for high inflation from becoming embedded in price-setting decisions."

When energy, agricultural and technology-related prices are all under upward pressure at once, the risk the RBA describes is that households and businesses begin to build high inflation into their own decisions. That is the outcome the Governor has said the bank wants to prevent.

The latest figures show why the bank is alert to that risk. The August monthly CPI indicator showed headline inflation of 4.0 per cent over the year. Underlying inflation, measured by the trimmed mean, is lower: Bullock said it has been about 3.5 per cent for the past six months. Both measures sit above the RBA's target range of 2–3 per cent, where the bank aims for the 2.5 per cent midpoint.

The distinction is worth keeping in mind. The 4.0 per cent figure is a headline measure, not an underlying one, and the RBA's concern is less about jumps in particular prices than about whether they feed into the broader trend.

The Governor has also been clear about what is not driving the problem. "There is no wage price spiral going on in Australia. Rises in wages are not driving these cost pressures," she said on 29 September. The pressures she listed to parliament are instead about the cost of energy, agricultural products and technology inputs.

What to watch

Several scheduled events will show how the RBA is weighing these forces:

  • The minutes of the September meeting, due on 13 October at 11.30 am AEDT, may give more detail on how the Board discussed energy and other price pressures.
  • The next CPI update, due on 28 October, will provide fresh data on how inflation is tracking.
  • The next decision is due at 2.30 pm AEDT on 3 November, alongside the November Statement on Monetary Policy, which will contain new forecasts.

The Board said it "will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed." That describes its stance; it is not a commitment to any particular outcome. Hauser himself, asked on 7.30 to predict a Board decision, noted that "There's nine people voting on it. So you'd be mad to take my advice."

The bottom line

The RBA's list of price pressures has grown. Oil and AI have dominated the conversation, but the Governor's 18 September statement put extreme weather on the same list, linking all three to upward pressure on energy, agricultural and technology-related prices. None of these forces is something the central bank can directly control. What it is focused on, by its own account, is stopping those pressures from becoming embedded in inflation expectations and price-setting, with the cash rate at 4.60 per cent ahead of the 3 November decision.