Key Highlights

  • Governor Bullock said monetary policy does not target housing prices, with prices down in most capital cities and new housing loans declining.
  • The RBA's goal is to return inflation to the 2–3 per cent range while retaining some flexibility on timing to balance full employment.
  • Prices remain around 50 per cent higher than in early 2020, and the Financial Stability Review found less than 1 per cent of borrowers in negative equity.

Facing senators on 28 October, the Governor drew a clear distinction between falling property prices and the goal the Reserve Bank is actually pursuing.

Six words in Governor Michele Bullock's opening statement to the Senate Economics Legislation Committee may prove among the most quoted of the hearing: "monetary policy does not target housing prices."

The line, delivered by videoconference at Supplementary Budget Estimates on 28 October 2026, came in a section of the statement describing what has been happening in the housing market. Housing prices have fallen in most capital cities, the Governor noted, and new housing loans have declined. At the same time, she observed that prices remain around 50 per cent higher than they were in early 2020.

For a public that often reads every rate decision through the lens of property, the clarification matters. It speaks to what the Reserve Bank is trying to achieve, how it judges success, and why a softer housing market does not, on its own, settle the question of where interest rates go next.

What the RBA is actually targeting

The Reserve Bank's monetary policy goal is spelled out plainly in the Governor's statement: to return inflation to the 2–3 per cent target range, with the midpoint as the reference point, while retaining some flexibility on timing in order to balance the objective of full employment.

Housing does not appear in that mandate as a target. House prices are part of the economic picture the Board monitors, because they affect household wealth, borrowing, construction and spending, but they are not the yardstick against which policy is set.

That framing is consistent with the broader purpose the Governor described at the University of New England graduation ceremony in Armidale on 23 October. "Parliament has charged us with promoting the prosperity and welfare of the Australian people," she told graduates, adding that "the work of the RBA is about people."

Why house prices still appear in the conversation

If housing is not a target, why does it keep coming up? Partly because interest rates work through the housing market. Higher borrowing costs reduce how much buyers can borrow and how much existing borrowers have left to spend, and that is one of the channels through which tighter policy cools demand across the economy.

The Monetary Policy Board's statement of 29 September noted that "housing prices have fallen in most capital cities" and that "The three increases in the cash rate target since the beginning of the year have tightened financial conditions". The September decision added a fourth increase, bringing the cash rate target to 4.60 per cent and the cumulative rise for 2026 to 100 basis points.

Assistant Governor (Economic) Sarah Hunter put the housing effect in context during her 60 Minutes interview, broadcast on 25 October. She said higher rates are slowing housing, as intended, and that tax changes from the May budget are also having an effect. She was careful to describe the aim: "We're not trying to achieve a sharp stop or a really big downturn or anything like that."

In other words, a cooling housing market is a symptom of tighter financial conditions, not the destination.

The financial stability lens

There is a separate reason the RBA watches property closely: financial stability. Here the Governor's message to senators was that household financial stability risks are contained, with only a small share of borrowers in negative equity or severe repayment difficulty.

The October 2026 Financial Stability Review, released on 1 October, offers more detail:

  • Less than 1 per cent of borrowers are estimated to be in negative equity.
  • Under a scenario in which house prices fell 20 per cent, around 5 per cent of mortgages would be in negative equity.
  • Around 2 per cent of variable-rate owner-occupiers have a cash-flow shortfall, well below the 2024 peak.
  • The median borrower can cover more than a year of scheduled payments from buffers.

The Review's overall assessment was that "the Australian financial system remains resilient, but there's no room for complacency." It also noted that high debt-to-income lending remains well below APRA's limit of 20 per cent.

Those findings help explain why the Governor can acknowledge falling prices without treating them as an alarm bell for policy.

Inflation remains the deciding factor

The data that matter most for the Board's 3 November decision are inflation figures, and the latest ones arrived on the same day as the Senate hearing. The Australian Bureau of Statistics reported that headline CPI rose 4.3 per cent over the 12 months to September 2026, up from 4.0 per cent in August, while trimmed mean inflation, the underlying measure, was 3.6 per cent.

Within the housing-related components, rents rose 3.6 per cent over the year and new dwelling costs rose 4.7 per cent. The broader Housing group rose 5.2 per cent, with electricity up 12.8 per cent over the year, mainly because Commonwealth electricity rebates ended.

The Governor told senators that "we still see inflation arising from domestic capacity pressures," and warned that "Inflation will therefore likely be higher than was our base case in August." She also said: "High inflation hurts everyone." And: "But we can't allow high inflation to persist."

The Board's September statement said it remains open to "increasing the cash rate target further if needed" and will be "attentive to the data and the evolving assessment of the outlook and risks". The November decision has not been made, and the Governor declined on 29 September to provide forward guidance.

The bottom line

Governor Bullock's statement that "monetary policy does not target housing prices" is a reminder of what the Board is measuring itself against: inflation returning to the 2–3 per cent range, balanced against full employment. Falling prices in most capitals, fewer new housing loans and contained financial stability risks are all part of the picture, but none of them is the goal. With headline inflation at 4.3 per cent and underlying inflation at 3.6 per cent, the 3 November decision will turn on the inflation outlook, and it remains undecided until the Board announces it at 2.30 pm that day.