In testimony to the Senate Economics Legislation Committee, Reserve Bank of Australia (RBA) Governor Michele Bullock assessed that inflation is likely to be higher than forecast in August as global cost pressures compound domestic capacity constraints. Inflation has recently been around 3.5% to 4%, compared with the 2%–3% target range. August forecasts projected a return to around the target midpoint in late 2027, but renewed increases in energy prices have worsened the outlook. Domestic inflation pressures also persist, reflecting a tighter labour market than previously judged and weak productivity growth. A further period of subdued demand growth is needed to reduce capacity pressures. The cash rate target has already increased by 100 basis points in 2026, including 25 basis points since the committee’s June hearing. The Monetary Policy Board will assess whether the tightening delivered so far is sufficient to return inflation to target within a reasonable time. On payments, Bullock reviewed the removal of card surcharging from Oct. 1 under a reform package that also includes lower interchange fee caps and greater transparency of payment costs. Several large providers have reduced card processing fees for small businesses, with signs of increased price competition. The RBA plans to publish priorities from its broader review of payments regulation by the end of 2026 and begin further consultation on priority issues by mid-2027. A separate consultation is examining how RBA settlement services could support tokenized asset markets and tokenized private money. For cash distribution, the recently passed Cash Distribution Framework Act 2026 gives the RBA crisis readiness and resolution powers to support continuity of critical services. The recent designation of Linfox Armaguard Pty Ltd brings it within the framework’s obligations, but does not indicate that those powers will be exercised. The Australian Competition and Consumer Commission will oversee pricing, access arrangements and service standards, while work to operationalize the new framework is underway.
Reserve Bank of Australia flags inflation likely to exceed August forecasts
Reserve Bank of Australia Governor Michele Bullock told the Senate Economics Legislation Committee that inflation would probably exceed August projections because of global cost shocks and persistent domestic capacity pressures. Following 100 basis points of cash rate increases in 2026, the Monetary Policy Board will assess whether existing tightening is sufficient to restore inflation to target. Her testimony also reviewed the removal of card surcharging from Oct. 1, plans to publish broader payments regulatory priorities by the end of 2026, and Linfox Armaguard’s designation under the new cash distribution framework.