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Both Governor Michele Bullock and Deputy Governor Andrew Hauser have reached for the same four words to explain the Reserve Bank's stance, and the phrase sums up the logic behind this year's run of rate increases.

Central bank communication is often dense. Statements are carefully drafted, forecasts come with caveats, and officials avoid committing to future moves. Every so often, though, a short phrase cuts through. In 2026, that phrase has been "Inflation is too high."

Deputy Governor Andrew Hauser used it on ABC 7.30 on 8 September. Governor Michele Bullock used it again before a parliamentary committee ten days later. Eleven days after that, the Monetary Policy Board lifted the cash rate target to 4.60 per cent, the fourth increase of the year. Understanding those four words is a good way to understand where the Reserve Bank of Australia (RBA) stands.

Two officials, one message

Mr Hauser's version came with an explanation attached. "Inflation is too high, and that's why we raise interest rates three times at the beginning of this year," he said.

Ms Bullock's version, in her opening statement to the House of Representatives Standing Committee on Economics on 18 September, came with a commitment: "Inflation is too high. We are focused on getting it back down and making sure that it does not become embedded."

The repetition is notable. Two of the RBA's most senior officials, speaking in different settings to different audiences, chose the same plain language. It leaves little room for doubt about what the Bank regards as its central problem.

Too high compared with what?

The words "too high" express a relative judgement, so the benchmark matters. The RBA's target is inflation of 2–3 per cent, and it aims for the 2.5 per cent midpoint.

Current readings sit above that range on both main measures:

  • Headline inflation. The August monthly CPI indicator showed annual headline inflation of 4.0 per cent.
  • Underlying inflation. Ms Bullock said on 29 September that underlying inflation has been about 3.5 per cent for the past six months.

These are different measures and should not be confused. Headline CPI is the broad measure of consumer prices; underlying inflation, measured by the trimmed mean, currently sits below it. The 4.0 per cent figure is headline, not underlying.

Ms Bullock told the committee that "Over the past year, both headline and underlying measures of inflation were around or a little above 3½ per cent." On either reading, inflation is above the band the RBA is charged with achieving.

The phrase carries extra weight because inflation had previously come down. Ms Bullock told MPs: "Inflation fell significantly from its peak of 7.9 per cent at the end of 2022 to be within the 2–3 per cent target range for a period in 2024 and 2025."

The Board's 29 September statement pointed to several sources of renewed pressure. "Global oil supply disruptions are maintaining upward pressure on global and domestic energy prices and inflation," it said, adding that "Higher fuel prices have partially been passed through to prices of other goods and services." It also flagged that "AI-related demand is driving rapid growth in global prices for technology-related goods."

At the committee, Ms Bullock had listed a broader set: "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."

The second half of the message: embedded

The four words are only half of the message. The other half is about persistence.

Ms Bullock's line to the committee ended with "making sure that it does not become embedded." At her 29 September media conference she expanded on the point: "It's critical that we stop expectations for high inflation from becoming embedded in price-setting decisions."

The Board's statement noted that "Short-term measures of inflation expectations remain elevated." That is the risk the RBA is trying to head off: that expectations of high inflation become embedded in price-setting decisions, in the Governor's words.

Ms Bullock was explicit 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.

Mr Hauser offered a way of thinking about why the issue resonates with households. He said the price level in the economy has risen by "10, 15, 20 per cent higher than it should have done". He also framed the RBA's response as protective: "We're doing it in order to try to protect the jobs gains that happened during COVID."

How the phrase translates into policy

The RBA's response so far is clear from the record: four increases in the cash rate in 2026, the latest a 25 basis point rise announced on 29 September and effective the following day.

On timing, Mr Hauser told ABC 7.30: "Inflation is due to be back in target by the end of next year." The August Statement on Monetary Policy expected trimmed mean inflation to "remain above 3 per cent until mid-2027".

What comes next for the cash rate is less certain, and the RBA has not committed to a path. 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." Ms Bullock told her media conference: "The Board will increase interest rates again if that's what's needed to get inflation down."

What to watch includes the next CPI update on 28 October and the Board's decision on 3 November, which will be accompanied by new forecasts in the Statement on Monetary Policy.

The bottom line

"Inflation is too high" is the simplest summary of the RBA's position, and both the Governor and Deputy Governor have used it. The phrase reflects headline inflation of 4.0 per cent in the August monthly indicator and underlying inflation of about 3.5 per cent, both above the 2–3 per cent target. Its companion idea, that inflation must not become embedded, explains why the Board has paid such close attention to inflation expectations. For now, those four words remain the clearest guide to how the RBA describes its task, and the yardstick against which each new data release will be read.