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Deputy Governor Andrew Hauser's description of how far prices have overshot offers one of the clearest explanations of why the cost-of-living squeeze still feels so sharp.

Inflation figures are usually reported as a rate of change: how much prices rose over the past year. But households do not experience inflation as a percentage. They experience it as the price on the shelf, the bill in the letterbox and the total at the checkout, all of which reflect several years of increases stacked on top of each other.

Speaking on ABC's 7.30 on 8 September, Reserve Bank of Australia Deputy Governor Andrew Hauser offered a striking way of putting that. He said the price level in the economy had risen by "10, 15, 20 per cent higher than it should have done".

That range is not a precise estimate, and it was not presented as one. It is a fragment from a broadcast interview, not a published calculation. But it captures something the monthly and quarterly inflation numbers can hide: the cumulative effect of the inflation surge of recent years.

Rates of change versus levels

The distinction between the inflation rate and the price level is at the heart of Hauser's comment.

The inflation rate measures the pace at which prices are rising. The price level is where prices actually are. When inflation is high for a period, the price level climbs quickly. When inflation later comes back down, prices keep rising, just more slowly. They do not, on their own, return to where they were.

Hauser's phrase "than it should have done" points to a gap between where prices are and where they might have been had inflation stayed closer to the RBA's target. He did not, in the quoted fragment, set out the precise benchmark or method behind the range, and it should be read as an illustration of scale rather than a formal figure.

How Australia got here

Governor Michele Bullock set out the recent history in her 18 September opening statement to the House of Representatives Standing Committee on Economics: "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."

That fall in the inflation rate was real progress. But the high inflation of the earlier period had already lifted the price level, and that higher level stayed in place.

Since then, inflation has moved back above target. The Governor told the committee: "Over the past year, both headline and underlying measures of inflation were around or a little above 3½ per cent." The most recent headline figure, the August monthly CPI indicator, showed annual inflation of 4.0 per cent. Underlying inflation, as measured by the trimmed mean, is lower at about 3.5 per cent for the past six months, according to the Governor. The RBA's target is 2–3 per cent, aiming for the 2.5 per cent midpoint.

So the cost-of-living pressure households feel is the product of two things: a price level that was pushed up by the earlier surge, and inflation that is still running faster than the target range.

Why that shapes the RBA's response

Hauser was direct about the link between high inflation and interest rate decisions. "Inflation is too high, and that's why we raise interest rates three times at the beginning of this year," he said on 7.30. The Monetary Policy Board added a fourth increase on 29 September, lifting the cash rate target by 25 basis points to 4.60 per cent.

He also framed the RBA's actions in terms of jobs. "We're doing it in order to try to protect the jobs gains that happened during COVID," he said.

On the outlook, Hauser said: "Inflation is due to be back in target by the end of next year." Speaking in September 2026, that means back within the 2–3 per cent range by the end of 2027.

The RBA is aware of the strain its decisions add. Bullock said at her 29 September media conference: "I know this decision is difficult for households with a mortgage and businesses with loans." She also said that scheduled mortgage payments, including interest, are back up to around 10 per cent of household disposable income.

What returning to target would and would not mean

It is worth being clear about what the RBA's goal implies for household budgets. Getting inflation back to target means prices rising more slowly. It does not mean the 10, 15 or 20 per cent overshoot Hauser described disappears.

Assistant Governor (Economic) Sarah Hunter, speaking on The Pay Off podcast on 22 September, described the goal as the cost-of-living squeeze fading into the background as inflation eases. That framing is about the pressure becoming less noticeable over time, not about prices reversing.

The Governor has also been clear about what is not causing 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 Board's statement pointed instead to global energy prices, partial pass-through of higher fuel prices to other goods and services, and AI-related demand for technology-related goods.

For anyone thinking about Hauser's maths in their own budget, a useful question is how the costs that matter most have changed over several years, rather than just the past twelve months. The next scheduled markers are the 28 October CPI update and the 3 November decision, which comes with the November Statement on Monetary Policy and updated forecasts. Hauser himself warned against reading too much into any one official's view of what comes next: "There's nine people voting on it. So you'd be mad to take my advice."

The bottom line

Hauser's remark that the price level has risen "10, 15, 20 per cent higher than it should have done" is a reminder that the cost-of-living squeeze reflects years of accumulated price rises, not just this year's inflation rate. Inflation fell from a 7.9 per cent peak into the target range in 2024 and 2025, but it is now back above target, with headline inflation at 4.0 per cent and underlying inflation around 3.5 per cent. The RBA's aim is to slow price growth back to the 2–3 per cent range, which Hauser said is due by the end of 2027, not to reverse the rise in prices that has already occurred.