The Reserve Bank needs ‘rock solid support from governments’ as it makes hard decisions over how to reign in inflation, deputy governor Andrew Hauser says.
Speaking at the Institute of International Finance Global Outlook Forum in Washington DC on Friday, Mr Hauser said the RBA is struggling to keep inflation stable while dealing with the global oil crisis.
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“You need to be very clear what you can’t do, because people are maybe thinking that monetary policy can solve everything,” he warned.
Mr Hauser said the limits of monetary policy had to be communicated to the public, calling supply shocks ‘a hard sell’.
Reserve Bank deputy governor Andrew Hauser. Picture: Supplied
“Inflation is never going to be higher, activity is going to be lower, we’re going to be poorer… there’s not much upside news in that story.
“We’ve had high inflation already, and people are already a bit resentful about that, so you need to be clear and direct with people, restate the importance of stabilising inflation.”
The bank also needs “rock solid support from governments at a time when [it is] going to be making hard decisions”, he added.
“The list of adverse supply shocks is lengthening. Covid, Ukraine, Iran, you can add climate and demographics along with that. They're not all negative,” Mr Hauser said.
Consumer Price Index movement
| Month | Headline CPI | Trimmed mean |
| Feb 2026 | 3.7% | 3.3% |
| Jan 2026 | 3.8% | 3.3% |
| Dec 2025 | 3.8% | 3.3% |
| Nov 2025 | 3.4% | 3.2% |
“The adverse supply shock is the central bankers’ nightmare. It pushes inflation up and it pushes activity down and causes you real challenges in managing that.”
Mr Hauser said central bankers were “having to become energy experts” as the Australia feels the brute force of clashing geopolitics overseas.
“Understanding the nature of the shock is not something that necessarily we as central banks are expert at, but we need to do so,” he said.
Mr Hauser confirmed earlier in the week that the RBA is in the middle of a new round of forecasting, but on Friday said it was challenging to differentiate between supply and demand shocks.
“Our models are much better at describing demand than supply,” he said. That’s the analytical challenge.
“In terms of designing policy, you can’t do much to affect the first-round effects on inflation, but you do need to assess what the impact over the medium term will be.”
The bank will have less than a week between receiving the latest inflation numbers from the Australian Bureau of Statistics and its next monetary policy board meeting.
The board’s decision on the future of 4.1% cash rate will come on 5 May, one week out from the Labor government’s federal budget.
Australia is battling the supply shock of an unexpected lack of oil availability. Picture: Getty
Treasurer Jim Chalmers is facing increased political scrutiny in the lead up after months of pointed commentary from the Reserve Bank that spending is too high.
Higher interest rates are piling onto the pressure, with the government being called on to balance relief for Aussies with enough restraint to keep inflation from spiralling.
Australia’s sluggish productivity, which became a high point of contention for Dr Chalmers and the government in 2025, also did not escape Mr Hauser’s criticism.
“Some of the more powerful adverse supply shocks that we are all experiencing now, namely, with the exception of the US, are not these things out of the clear blue sky, but the grinding lower effects of weaker productivity growth, and the lack of innovation,” he said.
Inflation has been rising in Australia since October. Picture: Getty
“We have to be clear that what monetary policy can do, which is anchor inflation and inflation expectations.”
All four of Australia’s big banks are anticipating a rate rise in May, with markets also pricing in a 72% chance of a hike.
A new 4.35% cash rate would put the country back to the 13-year high experienced throughout 2024.
This article first appeared on Mortgage Choice and has been republished with permission.
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