ContextOpening statement by Michele Bullock, Governor of the Reserve Bank of Australia, to the Senate Economics Legislation Committee (Budget Estimates 2026–2027), Canberra, 4 June 2026.
Why it mattersThe Reserve Bank of Australia's Governor explains to senators why rates went up, and sets out the bank's plan to end card surcharges.
- The Middle East conflict could push inflation even higher.
- Underlying inflation has been above 3% since the pandemic.
- Card surcharges and fees raise payment costs.
- Raise rates to tighten financial conditions and slow demand.
- End card surcharges and lower interchange fee caps.
- Explore tokenisation to improve wholesale markets.
Read the speech summary
1. Inflation and the cash rate
Addressing a Senate committee on budget estimates, RBA Governor Michele Bullock explained that inflation fell into the target range in early 2025, prompting rate cuts, but accelerated markedly after mid-2025 as strong output growth added to capacity pressure, so it was too high even before the Middle East conflict. The conflict has driven up oil and commodity prices, lifting fuel prices and showing tentative signs of pass-through, including to new dwelling costs, with likely second-round effects. The Board has lifted the cash rate three times this year, 75 points in all, which takes one to two years to work fully but is already easing the housing market, and which helps contain domestic pressures and second-round effects even though it cannot reverse the oil-driven increase already in train.
2. Outlook and payments
She recognised the strain on households but warned that persistent inflation would become embedded in price and wage setting, require higher rates for longer, and hurt lower incomes most. May forecasts see headline inflation peaking above 4.5% in the June quarter, underlying inflation above target until mid-2027, slower growth and a rising but still low unemployment rate, with two adverse scenarios for a longer conflict. Investment in software, data centres and renewables is a bright spot. On payments, card surcharging should end from 1 October, interchange caps are being lowered and cost transparency improved, and Project Acacia found growing interest in tokenisation to improve wholesale markets, with further initiatives being planned.