Key Highlights

Headline inflation peaked at 7.9 per cent at the end of 2022.

It was within the 2–3 per cent target range for a period in 2024 and 2025, picked up in the second half of 2025, and has been above target since.

The latest ABS data put headline inflation at 4.3 per cent and underlying inflation at 3.6 per cent.

In her opening statement to senators on 28 October 2026, Reserve Bank Governor Michele Bullock traced inflation's path from its 2022 peak, through a period back inside the target band, to its renewed rise above it.

At the end of 2022, Australian inflation hit its peak. Then it came down, slipped back inside the Reserve Bank of Australia's (RBA) target band, and appeared to have been brought under control. Now it is rising again.

That arc formed the backbone of Governor Michele Bullock's opening statement to the Senate Economics Legislation Committee at Supplementary Budget Estimates on 28 October 2026, delivered by videoconference. Her account offers a useful frame for understanding why the RBA has raised interest rates four times in 2026, and why it describes the current situation as one it cannot allow to persist.

From the 2022 peak to back inside the band

According to the Governor's statement, headline inflation peaked at 7.9 per cent at the end of 2022. That figure sits well over double the top of the RBA's 2–3 per cent target range, and more than three times the 2.5 per cent midpoint the Bank uses as its reference point.

The RBA's mandate frames why such a peak matters. As Governor Bullock told graduates at the University of New England in Armidale on 23 October 2026: "Parliament has charged us with promoting the prosperity and welfare of the Australian people". Inflation at that level erodes the purchasing power of incomes and savings, which is why the Bank treats price stability as central to that charge.

The Governor told senators that inflation was within the target range for a period in 2024 and 2025. That stretch represented the result the RBA had been working towards: price growth back between 2 and 3 per cent.

The RBA's target is to return inflation to the 2–3 per cent range with the midpoint as reference, and the Bank has said it allows some flexibility on timing in order to balance the goal of full employment.

The pick-up, and what changed since August

The improvement did not last. Governor Bullock said inflation picked up in the second half of 2025 and has been above target since.

"Recently, inflation has been around 3½ to 4 per cent in year-ended terms," she told the committee.

On the same day, the Australian Bureau of Statistics (ABS) published its September 2026 Consumer Price Index. Headline CPI rose 4.3 per cent in the 12 months to September, up from 4.0 per cent in the 12 months to August. The trimmed mean, the ABS's measure of underlying inflation, rose 3.6 per cent, up from a revised 3.5 per cent. The CPI excluding volatile items was 3.7 per cent.

The Governor identified several forces behind the renewed rise. "we still see inflation arising from domestic capacity pressures," she said. She also cited global cost pressures linked to the Middle East conflict, AI-related demand and extreme weather.

A key part of the Governor's account concerned forecasts. The RBA's August Statement on Monetary Policy projected inflation returning to the midpoint of the target range only in late 2027, with risks skewed to the upside.

Since then, conditions have moved against the Bank. "global energy prices are now much higher than had been assumed in the August forecasts," Governor Bullock said, before adding: "Inflation will therefore likely be higher than was our base case in August."

The September CPI bears that out on the energy front. Automotive fuel rose 23.6 per cent over the year, driven by higher world oil prices, while electricity rose 12.8 per cent, mainly because Commonwealth electricity rebates ended.

The Governor also told senators the Middle East conflict has re-escalated, short-term inflation expectations are elevated, and the full effects of recent rate rises are yet to be felt.

The policy response, and lessons from history

The return of inflation above target has brought a run of rate increases. The Monetary Policy Board's September decision lifted the cash rate target by 25 basis points to 4.60 per cent, effective 30 September 2026. It was the fourth increase of the year, bringing the cumulative rise in 2026 to 100 basis points.

The labour market has shifted over the same period. At her media conference on 29 September 2026, Governor Bullock noted that "the unemployment rate has risen from 3.5 per cent over the past couple of years to 4.6 per cent". Even so, she added, "we still think the labour market is a little bit tight." In her Senate statement she said the labour market appears slightly tighter than previously judged, despite unemployment having recently risen a little more than expected.

Assistant Governor (Economic) Sarah Hunter offered a longer historical view in an interview on 60 Minutes broadcast on 25 October 2026. She pointed to approaches tried in earlier decades, including price controls in the 1970s, a wage freeze in the early 1980s, and targeting credit or money. "What we learned through that sort of journey, none of those were particularly effective," she said.

Her conclusion was that interest rates, while imperfect, remain the most effective tool available: "there's no painless tool, but this tool does work, and that's why we use it."

Governor Bullock's own career spans much of that history. She joined the RBA full-time as a graduate economist in 1985, having come to the Bank via a cadetship. She studied economics at the University of New England.

Where the story goes next

The next chapter is not yet written. The Board meets on 2–3 November, with its decision and a new Statement on Monetary Policy due at 2.30 pm AEDT on 3 November 2026. That decision has not been made.

What the Board has said is that it judged "a further tightening in financial conditions is warranted" in September, and that its options include "increasing the cash rate target further if needed". The Governor has also been clear that she will not pre-commit, telling reporters on 29 September: "I'm not going to give you forward guidance."

The bottom line

Governor Bullock's account to senators describes a three-part journey: a 7.9 per cent peak at the end of 2022, a return to the target band during 2024 and 2025, and a renewed rise from the second half of 2025 that has kept inflation above target since. The latest ABS data put headline inflation at 4.3 per cent and underlying inflation at 3.6 per cent.

The Governor summed up the RBA's position plainly: "High inflation hurts everyone." She followed with: "But we can't allow high inflation to persist." How the Board responds to the latest stage of the journey will be known on 3 November.