RBA Governor Bullock says rate hikes don’t drive inflation as decision looms

Reserve Bank of Australia governor Michele Bullock appeared before the Committee for Economic Development of Australia to clarify that higher interest rates do not cause inflation, countering a common public perception. She explained that while rate hikes raise mortgage payments and affect household budgets, inflation reflects broader price movements in the economy. Bullock highlighted recent fuel price increases linked to Middle-East tensions and cited Labour’s housing-tax reforms, which have sharply reduced investor approvals.

She described the housing market as correcting from a very high base but still within historical downturn ranges. On technology, Bullock said AI is presently adding to excess demand and has not yet impacted supply, though it may create new jobs. Finally, she warned that a series of supply-side shocks could become entrenched in inflation expectations, complicating monetary policy.