Australian news and politics live: RBA Governor defends rate hike as ‘right for the economy’

Liberal MP Simon Kennedy asked Reserve Bank Governor Michele Bullock if high Government spending had pushed up inflation by increasing demand for goods and services.

“Yes, it does, because as you say there’s some public demand and then there’s transfers and taxes which also flow into that,” Ms Bullock said.

“Aggregate demand, we think, is currently in excess of the ability of the economy to supply those goods and services which are being demanded.

“Total demand is too high and that’s what’s giving inflationary pressures.”

Australia’s chief central banker Michele Bullock has told a parliamentary hearing the latest rate rise will be tough for those paying off a mortgage but argued doing nothing would have hurt the poor.

She made the acknowledgement on Friday, three days after the Reserve Bank of Australia increased the cash rate by 25 basis points to 3.85 per cent, undoing the August cut and marking the first tightening since November 2023.

“I recognise the challenges a cash rate increase brings for Australians with mortgages but it’s the right thing for the economy as a whole because we need to ensure inflation is low and stable so that households and businesses can plan, invest and create jobs,” she told the House of Representatives economics committee in Canberra.

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RBA Governor Michele Bullock says the latest rate hike is the “right thing for the economy”, while speaking at the House of Representatives economics committee in Canberra.

“I recognise the challenges a cash rate increase brings for Australians with mortgages but it’s the right thing for the economy as a whole because we need to ensure inflation is low and stable so that households and businesses can plan, invest and create jobs,” she said.

“I’ve said it before but high inflation hurts all Australians whether you’re paying a mortgage, renting, running a business or just trying to make ends meet.”

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Reserve Bank Governor Michele Bullock, alongside senior RBA officials, is appearing before the House of Representatives economics committee in Canberra, facing renewed scrutiny just days after lifting interest rates.

The appearance comes after the central bank moved to increase rates following an unexpected spike in inflation, a decision that has added further pressure to already stretched households.

On Tuesday, Ms Bullock confirmed mortgage holders would soon feel the impact, with repayments set to rise after the Reserve Bank lifted the cash rate by 25 basis points to 3.85 per cent.

Major banks and lenders have since indicated they will pass the increase on in full.

Alongside the rate decision, the RBA released updated economic forecasts showing inflation is now expected to stay above the bank’s 2–3 per cent target range until 2027, later than its previous projection of mid-2026.

While Ms Bullock declined to directly link inflation to Government spending.

Liberal Senator Jane Hume has declared the Liberal Party is capable of governing without relying on Coalition partners, as uncertaintly surrounds the future of the alliance with the Nationals.

Her comments follow suggestions from One Nation leader Pauline Hanson that she could work with either side of the traditional Coalition, while negotiations between the Liberals and Nationals remain unresolved.

“Pauline might be getting a little bit ahead of herself here – we’re two years out from an election, and at this stage, One Nation has only one member of the House of Representatives. I think the Liberal Party can govern on its own merits too,” Ms Hume told Sunrise on Friday morning.

Ms Hume said voter frustration was helping minor parties gain attention, linking One Nation’s momentum to economic pressures facing households.

She described this as “grievance politics”, saying inflation and cost-of-living pressures had left many Australians feeling overlooked.

“People are rightly aggrieved, and that’s why they’re talking about One Nation. But come the election, I want to make sure that it’s the Liberal Party that are presenting those incredible and genuine alternatives,” she said.

Asked whether governing alone would also mean without the Nationals, Ms Hume acknowledged the value of the long-standing partnership, while maintaining the Liberals could operate independently if required.

“We’re talking to our Coalition partner – our former Coalition partner – because let’s face it, we’re better in Coalition with the National Party, but the Liberal Party can do this on its own. Do not, do not be under any illusions that we can’t.”