RBA's Bullock: Inflation Far Too High, November 2-3 Hike in Play

Reserve Bank of Australia Governor Michele Bullock told a Senate committee on Wednesday that inflation is far too high, hours after September quarter CPI data beat expectations, with the RBA Board due to decide rates on November 2 and 3. The trimmed mean rose 1.0% in the quarter and 3.7% year on year against 3.6% expected, while monthly headline inflation climbed to 4.3% in September. Bullock declined to give guidance on the upcoming decision.

Context — Why Bullock's Supply Shock Comment Matters Now

Central banks routinely look through one-off price jumps such as fuel, on the argument that they fade without a policy response. Bullock said it is difficult to completely look through supply shocks, a departure from that convention. The remark matters because it arrived alongside a trimmed mean already above target, meaning the RBA cannot treat energy as a standalone story.

The RBA has raised its cash rate by a cumulative 100 basis points this year. Bullock has framed the key question for next week's meeting as whether that tightening will be enough to return inflation to the 2% to 3% target in a reasonable time. That framing sets the November decision up as a judgment on the sufficiency of existing restraint, not on the direction of policy.

Bullock had said earlier in the hearing, before the data landed, that inflation was likely to run higher than the RBA's August forecasts. She cited re-escalating conflict in the Middle East, much higher energy prices, and a labour market that looks a little tighter than the RBA had judged. The CPI release then validated that read within the same session.

The comparison with the Reserve Bank of New Zealand sharpens the picture. The RBNZ held earlier, choosing to absorb an energy-driven price jump rather than respond to it. Bullock's refusal to look through supply shocks places the two central banks on different paths, which is the mechanism behind the policy divergence now visible in the currency cross.

Bullock also said domestic demand is still running ahead of the economy's capacity to supply it. That statement matters for the inflation debate because it separates imported price pressure from homegrown pressure, and it undercuts the case that the RBA can wait out the current spike.

Data — What the Q3 CPI Release Showed

The trimmed mean, the RBA's preferred gauge of underlying inflation, rose 1.0% quarter on quarter and 3.7% year on year. Economists had expected 3.6% year on year, so the print came in one tenth above consensus. Monthly headline inflation reached 4.3% in September.

Metric	Latest	Expected / Prior
Trimmed mean, q/q	1.0%	n/a in report
Trimmed mean, y/y	3.7%	3.6% expected
Headline, September	4.3%	n/a in report
RBA cash rate tightening, 2026	100 bps cumulative	n/a

The two senior colleagues who spoke alongside Bullock offered readings that sit on different axes. Deputy Governor Andrew Hauser said the CPI was in line with expectations but still too high. Assistant Governor Sarah Hunter said inflation came in stronger than the RBA expected in August. Those are consistent rather than contradictory: the data matched what economists forecast, but ran above the path in the RBA's August Statement on Monetary Policy.

Hunter also said she does not expect a recession in Australia. That matters for the rate debate because it removes the argument that tightening must stop to protect growth. With underlying inflation above target, demand exceeding supply, and no recession forecast from the RBA's own assistant governor, the case for holding rests on the lagged effect of the 100 basis points already delivered.

Analysis — What It Means for AUD, Yields and Rates Pricing

The immediate read-through lands on the Australian dollar and the front end of the curve. Bullock's language, combined with firmer core inflation and her view that demand still exceeds supply, supports pricing for a move on November 2 and 3. Front-end yields are the cleanest expression of that repricing because they carry the least term premium and respond most directly to the near-term policy path.

The second-order effect runs through the currency cross. The RBNZ held, and Bullock declined to look through supply shocks. That contrast favours AUD/NZD, since the rate differential between the two economies is the primary driver of the pair. A trader positioning for divergence would be long AUD against NZD rather than long AUD against the dollar, because the dollar leg carries separate risk.

Energy is the transmission channel to watch. Bullock named re-escalating Middle East conflict and much higher energy prices as reasons inflation would run above August forecasts. Any further rise in crude therefore adds directly to the case for an RBA hike, because it feeds the exact supply shock the Governor said she cannot fully ignore.

The counter-argument deserves weight. Bullock gave no guidance on the November decision, and the RBA has already delivered 100 basis points this year. A Board that believes the existing tightening is still working through the economy can hold and wait for the Q4 CPI before acting. The RBA's updated forecasts, published with next week's decision, will show whether the Board still expects inflation back in target on its current path.

Positioning reflects that tension. The hawkish tone backs the Australian dollar and front-end yields, while the absence of guidance leaves room for the Board to surprise in either direction. Flow into AUD/NZD long positions is the cleanest expression of the divergence trade.

Outlook — What to Watch Next

The RBA Board meets on November 2 and 3, and the decision will be accompanied by updated forecasts. Those forecasts matter as much as the rate call itself, because they will show whether the RBA still expects inflation to return to the 2% to 3% target within a reasonable time on the current cash rate path.

Crude oil is the variable that feeds directly into the RBA's calculus. Bullock tied her pre-data warning to re-escalating Middle East conflict and much higher energy prices, so further gains in crude strengthen the hike case rather than sitting outside it.

On the data side, the labour market is the other input Bullock flagged as tighter than the RBA had judged. Any further evidence of tightness supports the demand-exceeds-supply argument she made to the committee.

What does Bullock's supply shock comment mean for retail investors?

It means the RBA is less willing than the RBNZ to ignore energy-driven price jumps. For anyone holding Australian dollar exposure or rate-sensitive assets, the practical effect is that an energy price rise now feeds into rate expectations rather than being dismissed as temporary. That changes how the market prices each new inflation print.

What happens next for the Australian dollar?

Bullock's hawkish tone backs the currency, and the contrast with the RBNZ's hold favours AUD/NZD specifically. The November 2 and 3 decision is the next binary event, and the accompanying forecasts will shape whether the market extends or unwinds its rate-hike pricing. The absence of forward guidance from Bullock keeps that outcome genuinely uncertain.

Why did the trimmed mean matter more than headline inflation?

The trimmed mean is the RBA's main gauge of underlying inflation, so it carries more weight in policy decisions than the monthly headline figure. At 3.7% year on year it came in above the 3.6% expected, confirming that price pressure is not confined to volatile components. Headline at 4.3% in September reinforces the same message.

Bottom Line

Bullock's refusal to look through supply shocks, with core inflation above target and demand exceeding supply, keeps an RBA hike on November 2 and 3 firmly in play.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.