Australia’s Central Bank Warns Losing Public Trust Will Make Inflation Harder to Beat
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Australia’s central bank warned on November 5, 2026 that public trust in its ability to beat inflation has slipped. Deputy Governor Andrew Hauser said that if people stop believing the bank can bring prices back down, the job of fighting inflation becomes harder and more costly for everyone.
What happened
Hauser spoke at the Australian National University in Canberra on Thursday, in the first public appearance by a Reserve Bank of Australia official since the bank raised interest rates earlier in the week. On November 3, the bank raised its cash rate to 4.85%, its fifth increase of 2026 and the highest level in 18 years.
Hauser said surveys showed that trust in the bank’s ability to meet its inflation goals in the near term had fallen materially, even though overall trust in the institution remained high and stable. He warned that trust is hard won and easily lost, and that a loss of trust could make the job of taming price pressures even more costly.
The warning comes after years of high prices. Australian inflation rose to 4.3% in September, well above the bank’s target range of 2% to 3%. Apart from a brief spell in early 2025, inflation has sat above the middle of that target band since the end of COVID-19, and Hauser said the steady build up in prices over that time appeared to be fuelling public anger.
Hauser said consumer confidence in Australia is exceptionally weak, and households now rank inflation as their top economic concern. Longer term inflation expectations have stayed anchored among financial markets, but businesses have increasingly told the bank they are less sure the inflation target will be reached over the next five to ten years.
He also made the case for why trust matters in practical terms. If the public understands and trusts the central bank’s plan, the rate rises needed to bring inflation down can be smaller and less costly in lost output and jobs. If trust fades, the bank may have to push harder to get the same result.
Hauser quoted former US Federal Reserve Chair William McChesney Martin, who once described a central bank as a chaperone who has ordered the punch bowl removed just when the party was really warming up. The point was that raising rates is unpopular by design, which is why the bank needs the public to believe the short term pain has a purpose.
Why it matters for beginners
Trust sounds abstract, but it works through a simple loop. If workers and businesses expect prices to keep rising fast, workers ask for bigger pay rises and businesses set higher prices to cover their costs. Those higher wages and prices then keep inflation going, which is exactly what the central bank is trying to stop.
When people believe the central bank will bring inflation back to target, they are less likely to build high inflation into their wage demands and price decisions. That belief does part of the central bank’s work for it. When belief fades, the bank has to lean harder on interest rates instead, and higher rates mean more expensive mortgages and loans for ordinary households.
This is also a useful reminder that a central bank’s job is not only about setting rates. Explaining its decisions in plain language, and being believed, is part of how it keeps inflation under control.
What to watch next
The Reserve Bank’s final rate decision of the year is due on December 8, 2026. Watch whether the bank holds rates at 4.85% or signals another move, and what Governor Michele Bullock says about the inflation outlook.
Also watch Australia’s October inflation release, due on November 25, 2026. If inflation cools from here, the case for further hikes weakens. If it stays high, markets may start pricing in even more tightening.
Finally, watch whether Australian banks pass on the full November rate rise to variable mortgage holders, and when the higher repayments start to bite.
FAQ
What is the Reserve Bank of Australia? It is Australia’s central bank. It sets the cash rate target, which guides interest rates across the economy, and it aims to keep consumer price inflation between 2% and 3% over time.
What is the cash rate right now? The cash rate target is 4.85%, after the Reserve Bank raised it by 0.25 percentage points on November 3, 2026. It was the fifth increase of the year and the highest level in 18 years.
Why does public trust matter for inflation? Because expectations shape behaviour. If people expect high inflation to continue, they ask for higher wages and charge higher prices, which keeps inflation going. If they trust the central bank to bring inflation back down, that loop weakens and the bank may not need to raise rates as much.
Has the Reserve Bank lost the public’s trust completely? No. Hauser said overall trust in the institution remained high and stable. The concern is narrower: confidence in the bank’s near term ability to bring inflation back to target has fallen, and the bank wants to rebuild it before the damage spreads.
Sources
Reuters, November 5, 2026, “Australia’s central bank warns public confidence in inflation fight is slipping”, https://srnnews.com/australias-central-bank-warns-public-confidence-in-inflation-fight-is-slipping/. AAP, November 5, 2026, “Losing trust will make tackling inflation harder: RBA”, https://aapnews.aap.com.au/news/losing-trust-will-make-tackling-inflation-harder-rba.
This article is for general information and education only. It is not legal or financial advice.
