Sarah Hunter: Inflation and the impact of the Middle East conflict
Speech by Ms Sarah Hunter, Assistant Governor (Economic) of the Reserve Bank of Australia, at the Bloomberg Forum for Investment Managers, Sydney, 19 May 2026.
Introduction
Before I begin, I would like to acknowledge the Gadigal people, the Traditional Custodians of the land on which we are meeting today. We are very lucky in Australia that our First Nations people protect our land and culture to hand down to future generations, and I would like to pay my respects to Elders past and present and extend that respect to any First Nations people here with us today.
Today I'm going to talk about inflation and how the RBA has used our frameworks to think about the outlook in the context of the current Iran conflict.
What do we mean by inflation?
Let me start by clarifying what the RBA's price stability objective means – and what it doesn't. To be quite specific, the goal is to achieve average prices growth across a broad range of goods and services – that is, the CPI – of between 2–3 per cent per year. At any point in time, the price for a particular good or service might be rising faster or slower than others (Graph 1). But we are focused on what is happening, on average, across all goods and services in our economy.
This matters because factors outside a central bank's control can shift the price of a good, or a small group of goods, relative to the rest. Examples include increases in the global price of oil, as we are experiencing now, or the long-run fall in the price of electronics; on a like-for-like basis, computers today are much cheaper than they were 10 or 20 years ago.
Monetary policy won't target such relative price changes. Rather, our focus is making sure that these narrow, relative price changes don't spread into sustained broader price changes pushing inflation consistently above or below our target.