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During her routine press conference following the Reserve Bank of Australia’s (RBA) latest cash rate decision, Governor Michele Bullock addressed the current state of the economy.
“In the latter half of last year, the economy expanded at a rate surpassing our potential growth expectations. We’ve also observed a slight tightening in the labor market, contrary to our previous predictions of stability. Meanwhile, core inflation remains elevated,” Bullock commented.
She added, “This collection of data indicates that there is marginally more excess demand in the economy than we anticipated in February, leading to somewhat intensified inflationary pressures.”
The economy experienced a 2.6% growth in the December quarter compared to the previous year, significantly exceeding the RBA’s potential growth estimate of 2%.
Core inflation climbed to 3.4% for the year ending in January, up from 3.3% at the close of December 2025. Additionally, the unemployment rate has remained at a historic low of 4.1%.
Bullock said that, while higher energy prices triggered by the war in the Middle East would contribute to inflation, they weren’t the reason behind today’s decision.
“Inflation was already too high, reflecting the fact that demand is outstripping supply. Higher fuel costs will not slow demand enough on their own to address this. If we do not act, these price pressures will spread and the eventual adjustment would be harder.”
— Alex Gallagher