Appearing before federal MPs on 18 September, Governor Michele Bullock put a date on the end of Australia's inflation fight that is still more than a year away.

For households hoping the cost-of-living squeeze is nearly over, one sentence from Michele Bullock's appearance in Canberra last month offered a sober reality check.

The Reserve Bank Governor told the House of Representatives Standing Committee on Economics on 18 September that "inflation will not return to around the midpoint of the target range until late 2027."

The midpoint she referred to is 2.5 per cent, the centre of the RBA's 2–3 per cent target range. Eleven days after that testimony, the Monetary Policy Board lifted the cash rate target by 25 basis points to 4.60 per cent, its fourth rise of 2026.

How far inflation has come, and how far it has to go

Bullock's opening statement framed the challenge as unfinished business rather than a fresh crisis. "Inflation fell significantly from its peak of 7.9 per cent at the end of 2022," she told the committee.

But progress has stalled at a level the Board considers too high. "Over the past year, both headline and underlying measures of inflation were around or a little above 3½ per cent," the Governor said.

The latest figures bear that out, though it is worth keeping the two measures separate:

  • Headline CPI was 3.9 per cent over the year to the June quarter, and the monthly CPI indicator showed 4.0 per cent annual headline inflation in August.
  • Underlying inflation, measured by the trimmed mean, was 3.6 per cent over the year to the June quarter. At her 29 September media conference, Bullock summarised it as "about 3.5 per cent", roughly a percentage point above the target midpoint.

Headline inflation captures every price movement, including volatile items such as fuel. The trimmed mean strips out the largest rises and falls, giving a better read on the persistent trend. It is the underlying measure that the late-2027 timeline chiefly concerns.

Three documents, slightly different timelines

The late-2027 date is broadly consistent with the RBA's other recent communications, though the wording varies a little depending on the source.

The August Statement on Monetary Policy expected headline inflation to "return to the 2–3 per cent target range by early 2027". It forecast trimmed mean inflation to stay above 3 per cent until mid-2027 and reach the midpoint in early 2028. The August minutes described underlying inflation at around 2½ per cent in late 2027. Bullock's own phrasing in Canberra was "until late 2027".

The forecast table in the August Statement tracked year-ended trimmed mean inflation at 3.3 per cent in December 2026, 3.0 per cent in June 2027, 2.6 per cent in December 2027 and 2.4 per cent by June 2028. Headline CPI was forecast at 3.6 per cent in December 2026, falling to 2.8 per cent by June 2027 and 2.6 per cent by December 2027.

An important caveat: those forecasts were prepared in August with a cash rate assumption of around 4.3–4.5 per cent. They pre-date the September rise to 4.60 per cent and should not be read as reflecting the Board's current settings.

What else the Governor told MPs

The testimony painted a picture of an economy that is slowing in places but still running into capacity limits.

On jobs, Bullock said: "The unemployment rate – at 4.5 per cent – is low by historical standards." She added that "the share of the population with a job is close to a record high." By 29 September she cited an unemployment rate of 4.6 per cent.

On housing, she noted that "Housing prices have fallen in most capital cities and new housing loans have declined", while pointing out that "housing prices are still around 50 per cent higher than they were in early 2020." She said "the share of borrowers in negative equity remains very limited".

On the supply side, she identified a structural constraint: "Continued weak productivity growth means that the economy cannot grow strongly without putting pressure on inflation."

And on global forces, she flagged two sources of pressure. "Oil and related prices have increased sharply again and will add directly to inflation," she said. She also noted that "The global AI boom is driving stronger growth in economies that are key parts of the AI supply chain", with AI "driving higher global prices for some AI-related technologies that are supply constrained."

Why the timeline shapes policy

A return to the midpoint in late 2027 would mean an extended period above target. At her media conference on 29 September, Bullock observed: "we have been outside of our target now for six years."

The Board's September statement said it is focused on preventing high inflation from becoming embedded, and that "a further tightening of financial conditions" was warranted to return inflation to target within a reasonable period. It said some of the upside risks flagged in August were materialising, short-term inflation expectations were high and recent inflation outcomes had been stronger than expected.

The Governor also gave a practical yardstick. Quarterly inflation, she said, needs to be "more around .6 rather than .8 and 1", a pace consistent with roughly 2.5 per cent a year.

There is a lag to consider too. Bullock said the effects of policy can take "12, perhaps even 18 months" to work through, and that "A lot of that effect is still to flow through" from earlier rises this year. On that timeframe, the full effect of September's increase would not be felt until well into 2027.

Whether the cash rate rises again is open. "I'm not going to give you forward guidance," Bullock said, though she also stated that "The Board will increase interest rates again if that's what's needed to get inflation down." The next decision is due at 2.30 pm on 3 November, after the next CPI release on 28 October.

The bottom line

Bullock's Canberra testimony set a realistic horizon: underlying inflation is not expected back around 2.5 per cent until late 2027, with the August forecasts pointing to the midpoint in late 2027 or early 2028 depending on the document. Those projections were made before September's hike, and the Board has since judged that tighter financial conditions were needed to keep that return on track. For Australians, the takeaway is that the RBA sees the final stretch of the inflation fight as a long one, and it will be guided by incoming data rather than a preset path.