RBA governor Michele Bullock warns Australia faces global inflation threat from oil prices

Reserve Bank governor Michele Bullock has warned Australia faces the same inflation threat as other nations, driven by rising oil prices from the prolonged Middle East conflict.

During a House of Representatives economics committee hearing on Friday, Ms Bullock said oil prices had spread through the economy and issued a grim warning for mortgage holders.

“Because of these capacity pressures and the Middle East conflict, inflation is likely to remain elevated for some time,” she said.

The RBA’s forecasts in August suggested that inflation would not return to around the midpoint of the target range until late 2027.

“Developments since then suggest that although growth in the Australian economy is slowing, some of these upside risks to inflation appear to be materialising.”

That would put more pressure on the RBA to raise the official cash rate again to rein in inflation, which is currently 3.5 per cent – above the target of 2-3 per cent.

Ms Bullock said central banks around the world had tried to be patient and wait for the fallout of rising oil prices due to the US-Iran conflict, but were now starting to lift the cash rate.

“We started from a slightly different position than others, we started with excess demand,” she said.

“We raised in February, then the conflict started and we raised two more times before we paused and saw how it would pan out.

“I think we are now in a very similar position to other countries in the sense that we still have a bit of excess demand and now we have this impetus from a prolonged Middle East conflict.”

The US Federal Reserve overnight lifted the official cash rate by 25 basis points, to 3.75 – 4.0 per cent range.

The US is not alone in lifting the cash rate, with the European Central Bank – representing 21 countries – raising its benchmark interest rate by 25 basis points to 2.5 per cent, while the Bank of Japan is predicted to move on the cash rate on Friday.

Defying President Donald Trump’s call for a “patriotic” cuts, central bank chief Kevin Warsh on Wednesday stressed the need to combat inflation that has been “too high” for “too long”.

In a post on Truth Social on Wednesday afternoon, Mr Trump said US interest rates should be “1 per cent, or less, because we are the Best Credit in the World — BY FAR”.