Michele Bullock: Opening Statement - House of Representatives Standing Committee on Economics

Why It Matters

Tighter monetary policy aims to curb inflation without derailing employment, while modernising payments and governance strengthens the RBA’s ability to support Australia’s economic stability and growth.

Key Takeaways

• Cash rate raised 25 bps to 3.85%
• Inflation reached 3.6% in Dec 2025 quarter
• Unemployment steady at 4.2%, near record jobs
• Payments review conclusions due March 2026
• RBA now overseen by three distinct boards

Pulse Analysis

The Reserve Bank of Australia’s decision to lift the cash‑rate by a quarter‑point reflects a shift in its inflation outlook. After a period of declining price pressures, headline inflation rebounded to 3.6% in the December 2025 quarter, driven by higher costs across services, retail goods and housing. While the RBA still targets a 2‑3% range, it now expects inflation to return to the midpoint only by mid‑2027. This tighter stance is intended to temper excess demand without jeopardising the labour market, which remains close to full employment with unemployment at 4.2% and 1.7 million additional jobs since the pandemic.

Beyond monetary policy, the RBA is accelerating reforms in the payments ecosystem. A comprehensive review of surcharging and merchant‑card costs, informed by over 170 written submissions and 100+ stakeholder meetings, will be published by March 2026. Subsequent consultations will address emerging players such as mobile wallets, buy‑now‑pay‑later platforms, and three‑party card schemes, aligning regulation with rapid digital innovation. The central bank’s focus on operational resilience—highlighted by a recent settlement system glitch—underscores its commitment to a secure, efficient infrastructure that underpins both electronic and cash transactions.

Governance reforms completed in March 2025 have reshaped the RBA’s oversight structure. By separating responsibilities among a Governance Board, a Monetary Policy Board, and a Payments System Board, the institution aims to enhance transparency, accountability, and strategic focus. These changes, coupled with the ongoing cash‑distribution initiatives that seek sustainable models for regional communities, position the RBA to better manage macro‑economic challenges while fostering a modern, inclusive financial system.