On 8 September Deputy Governor Andrew Hauser named three risks that could push inflation higher; on 29 September the Monetary Policy Board said some upside risks had materialised and lifted the cash rate to 4.60 per cent.

When Andrew Hauser sat down with ABC's 7.30 on 8 September 2026, the Reserve Bank of Australia (RBA) had held the cash rate at 4.35 per cent for a month. The Board's August minutes had described policy as "sufficiently restrictive", while noting that members remained "alert to the upside risks to the inflation outlook and being ready to act should they materialise."

Hauser's interview put names to those risks. Exactly three weeks later, on 29 September, the Board unanimously raised the cash rate target by 25 basis points to 4.60 per cent, effective 30 September. Its statement said some upside risks had materialised.

The timeline, step by step

  • 10–11 August: The Board unanimously leaves the cash rate at 4.35 per cent. The minutes judge risks to be skewed to the upside.
  • 13 August: Assistant Governor (Financial Markets) Christopher Kent says "the three cash rate increases earlier this year are having their intended effects", while flagging that AI investment and higher offshore bond yields could make a given cash rate less restrictive.
  • 8 September: Hauser lists three upside risks on 7.30 and declines to pre-commit the Board, which he notes has nine voting members.
  • 14 September: Assistant Governor (Economic) Sarah Hunter tells the Regions Rising summit: "we do think the risks to inflation right now are skewed to the upside".
  • 18 September: Governor Michele Bullock tells a parliamentary committee in Canberra: "Oil and related prices have increased sharply again and will add directly to inflation."
  • 29 September: The Board lifts the cash rate to 4.60 per cent, the fourth increase of 2026.

The three risks, one by one

Risk one: the Middle East crisis

Hauser's first risk was the Middle East crisis. By the time of the September decision, the Board's statement cited further disruption to global oil supply from the Middle East conflict as one of the risks that had materialised. It also noted that higher fuel prices were partly passing through to other goods and services.

The August minutes had already observed that global oil and product inventories were much lower than at the start of the conflict. At her 29 September media conference, Bullock described the conflict's persistence plainly: "It's lasted, and there doesn't seem to be any end to it." She also pointed to knock-on effects across the supply chain: "fuel prices, fertiliser prices, transport prices, all these things now are permanently higher."

The August minutes recorded that headline inflation eased unexpectedly in year-ended terms in the June quarter, mainly because of lower retail fuel and travel prices. By the August month of 2026, the monthly headline Consumer Price Index (CPI) showed annual inflation of 4.0 per cent. That headline figure is distinct from underlying inflation, which Bullock put at "about 3.5 per cent for the past six months"; the trimmed mean measure was 3.6 per cent in the June quarter.

Risk two: "a really unexpected global boom driven by AI"

Hauser's second risk was, in his words, "a really unexpected global boom driven by AI". He was measured in describing it, calling it "actually a fairly conventional investment boom", and, on the valuations attached to AI, said: "It could be spectacularly high or it could be zero."

The Board's 29 September statement listed strong AI-related demand pushing up technology-goods prices among the risks that had materialised. Bullock went further at the media conference: "The AI boom is also adding to demand in the Australian economy at a time when we already have capacity pressures."

She added a qualification about data centres: "A lot of that is imported, so it's actually not directly impacting on demand in Australia." On the longer-term upside, she was candid about the uncertainty: "there possibly is productivity gains. When? I don't know."

Risk three: weak supply potential

The third risk Hauser named was weak supply potential in the Australian economy. Unlike the first two, the Board's statement did not single this out as a risk that had materialised. It did, however, say that capacity pressures remain, and Bullock's own language on the supply side has been blunt.

In Canberra on 18 September she said: "Continued weak productivity growth means that the economy cannot grow strongly without putting pressure on inflation." She described weak productivity as a fundamental challenge for the next few years. On 29 September she was more direct still: "The bottom line is that productivity is doing nothing."

She also connected productivity to labour costs, saying: "Unit labour costs, yes, they are rising more quickly than is consistent with inflation". She attributed that to weak productivity rather than wages, adding: "there is no wage price spiral going on in Australia."

How the response was framed

Hauser had said the Board was taking a gradual approach to protect jobs but could raise rates further if needed. The September move was consistent with both halves of that description: a single 25 basis point step, following three increases earlier in the year, for a total of 100 basis points of tightening in 2026.

The statement said the Board judged a further tightening was warranted to return inflation to target in a reasonable period, and that it "will continue to do what it considers necessary" to do so. Bullock's opening line at the media conference summed up the logic: "Higher interest rates are needed to ensure inflation returns to target."

What the record does not show is how much weight each individual risk carried in the decision. The minutes of the September meeting are due at 11.30 am AEDT on Tuesday 13 October 2026, and their contents are not yet known.

The bottom line

Hauser's three upside risks were the Middle East crisis, an AI-driven global boom and weak domestic supply potential. Three weeks after he named them, the Board said some upside risks had materialised. It cited oil supply disruption and AI-related demand explicitly, alongside persistent capacity pressures, and lifted the cash rate to 4.60 per cent.

The next decision is due at 2.30 pm on 3 November 2026, after the September CPI release on 28 October. Bullock has declined to signal what comes next: "I'm not going to give you forward guidance."