Australian Prime Minister Anthony Albanese speaks during a press conference at Australian Parliament House in Canberra Australia, on Aug. 19, 2026. Hilary Wardhaugh/Getty Images
Australian Prime Minister Anthony Albanese has brushed off claims by Reserve Bank Australia (RBA) Governor Michele Bullock that domestic pressures were the primary driver behind the nation’s most recent interest rate hike.
Shortly after the interest rate rose from 4.60 to 4.85 percent on Nov. 3, Bullock gave an address in which she pointed to domestic capacity pressures, rather than any direct impact from heightened oil prices as a result of war in the Middle East.
“However, I want to be very clear that we are not tightening monetary policy because of the direct impact of oil prices on inflation.”
“Regularly, [Bullock] has spoken about international pressures as well as domestic demand, that’s something that we don’t disagree with,” he said.
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“I’m sure that Michele Bullock would have acknowledged that oil prices have had an impact, as Jim Chalmers did.”
“Markets are expecting interest rates rises in every advanced economy,” he said.
“[The war’s] re-escalation is putting sustained upwards pressure on inflation,” he added.
“It’s weighing on growth and its end can’t come soon enough.”
The most recent increase means Australia’s interest rate is now among the highest in the developed world, exceeding Japan, Singapore, Canada, China, South Korea, the UK, European Union, United States, and Saudi Arabia. Only Iceland has a higher official interest rate at eight percent.
The RBA says interest rates are expected to remain elevated throughout 2027, but Bullock says it is working to avoid tipping the economy into an official recession.
“Our central forecasts do not see us going into recession, but it does see growth slowing quite markedly,” she said.
The RBA raises interest rates to discourage spending and borrowing when inflation is too high, helping to reduce demand across the economy and bring inflation back towards its target.
When inflation remains high, the purchasing power of money declines, meaning households can afford fewer goods and services, potentially reducing the standard of living.
Asked if the government would tighten spending to help ease inflation, Albanese said there would be “hard decisions.”
“We were always going to be fiscally responsible because my government is a fiscally responsible government, and we will take appropriate action,” he said.
Analysts have expressed concern over the latest rate increase, saying rates had been kept too low for too long, which caused Australians to believe “cheap money” was standard.
