At 2:30pm on Tuesday 29 September 2026, the Reserve Bank of Australia delivered its fourth interest-rate rise of the year: a 25-basis-point increase taking the cash rate to 4.6 per cent, the highest level since late 2011. An hour later, Governor Michele Bullock faced the press for a full hour of questions — pressed on whether rates still work, whether a recession looms, and whether households should simply get used to it. Her answers were among the frankest of her tenure.
Meridian did not attend this press conference. This feature is an editorial reading of Governor Bullock's published on-record remarks, with every quotation taken from the coverage cited in the sources below.
The decision was unanimous, and the statement accompanying it was unambiguous: inflation is still too high, some of the upside risks flagged in August are materialising, and the board judged that "a further tightening in financial conditions is warranted". The bank kept its hawkish language, saying it will continue to do what it considers necessary to bring inflation sustainably back to target — "including increasing the cash rate target further if needed".
The fourth hike — and its scale
The numbers tell the story of an extraordinary tightening cycle. Four hikes in 2026 have added a full percentage point to the cash rate in less than a year. The average borrower, according to live coverage of the decision, is now paying hundreds of dollars more each month than at the start of the year. Bullock acknowledged that the medicine takes time to work — and that the bank is still waiting to see the full effect:
"We have to see how these four interest rate increases are going to affect the economy over the next few months."
— Michele Bullock, RBA press conference, 29 September 2026 (via Allhomes live coverage)
She reminded reporters that monetary policy operates with a long lag: "It does not happen overnight and can take 12–18 months for the full effect of rate rises to be felt." That lag is both the board's justification and its risk — tightening into an economy whose response to past hikes is still unfolding.
Why the board moved again
The drivers, as laid out in the RBA's statement and Bullock's answers, were a familiar but worsening mix: the broadening conflict in the Middle East pushing up global energy prices, AI-related demand adding to price pressures, and persistent domestic cost pressures. Bullock told the press conference the Middle East conflict had made things "much worse" — a blunt assessment of an offshore shock Australia cannot control but must still respond to.
The board's statement was equally direct: "The three increases in the cash rate target since the beginning of the year have tightened financial conditions and the economy appears to be slowing. But inflation is still too high and the board judged that, in light of recent developments, a further tightening in financial conditions is warranted to support a return of inflation to target in a reasonable period."
With inflation running at about 3.5 per cent against a 2.5 per cent target, the board's patience had clearly run out. Notably, Bullock revealed that the board had not even entertained a bigger move: "We considered holding [rates] and 25 basis points." The debate was between standing pat and a quarter-point rise — not between 25 and 50.
"Interest rates still work"
The most combative exchange of the press conference came when Bullock was asked whether another rate rise would actually achieve anything — a question reflecting a public mood that sees only pain and no progress. She met it head-on:
"I understand why the people who are impacted and are carrying the burden feel like this but actually the interest rate increase gets into all sorts of cracks. Interest rate rises still work and they work because there's other channels that interest rates impact. People don't see those things."
— Michele Bullock, RBA press conference, 29 September 2026 (via Allhomes live coverage)
It was the clearest defence yet of the transmission mechanism: rates work through channels beyond the mortgage statement — the exchange rate, asset prices, business investment, the confidence of borrowers and lenders. Bullock acknowledged Australians are "quite rightly very annoyed and upset" about the cost of living, but insisted the invisible channels are doing their work. "This is tough," she said. "The board did not take this decision to (hike rates) lightly."
Not the 1990s
Asked whether Australia risked a return to the double-digit interest rates of the 1990s, Bullock shut the comparison down quickly:
"Inflation back in the 1990s was double digits as well. Inflation is not in double digits — inflation is about three-and-a-half per cent. It's a percentage point above our target. Inflation is nowhere near what it was in the 1990s so I think we're in a good position at the moment … we think that financial conditions are restrictive."
— Michele Bullock, RBA press conference, 29 September 2026 (via Allhomes live coverage)
The message was calibration: painful, but not a crisis of the 1990s kind. Financial conditions are restrictive, the board believes, which means the medicine is in the system — it just hasn't finished working yet.
No promise it's the last
What Bullock would not do was promise an end. Asked to forecast the path of rates, she declined — and left the door firmly open to further tightening:
"I'm not going to forecast where interest rates are going to go to. If it turned out the restrictiveness is enough, maybe there does not need to be any more rises."
— Michele Bullock, RBA press conference, 29 September 2026 (via Allhomes live coverage)
On the recession question, she skirted a direct answer but laid out the logic with unusual bluntness: "If inflation expectations get away from us — if people say '3.5 per cent is fine', if that gets away, then that's a circumstance where you might need quite a dramatic slowdown in the economy." The warning was unmistakable: if Australians accept 3.5 per cent inflation as normal, the cure could be far worse than the disease. And on the long view, she offered cold comfort to anyone waiting for the old normal: "What I do know is that we're not going to go back down to interest rates close to zero." As for whether 4.6 per cent is the new normal — "I don't know if this particular level is the new normal."
What it means for households
Bullock closed with the honesty the moment demanded. "There's nothing I can say to make this better for households," she said. "We knew this was going to hit some people pretty hard. But we have to do it." Her justification was the counterfactual: "I know they [Australians] don't understand why we have to do this but the point is if we don't address this, inflation will get worse, rates will have to get higher — and the economy will be in a worse position."
The global context underlines the stakes. Australia now holds the second-highest cash rate in the developed world — only Iceland's is higher — with rates in the UK, US, New Zealand, Canada and Sweden all below Australia's. Markets, notably, were unimpressed by the hawkishness: the Australian dollar slipped after Bullock's press conference, a sign traders doubted the November hike she refused to rule out. The November decision — a Melbourne Cup day announcement — is now the one to watch. Bullock has made the terms clear: inflation back to 2.5 per cent, whatever it takes.
Sources
