SYDNEY, Nov 5 (Reuters) – Public confidence in the Reserve Bank of Australia’s ability to control inflation was eroding, a top central banker said on Thursday, warning that a loss of trust could make the job of taming price pressures even more costly.
Speaking in Canberra after raising interest rates for the fifth time this year, Reserve Bank of Australia Deputy Governor Andrew Hauser said confidence in the RBA’s ability to deliver on its inflation mandate had weakened among some Australians.
“If the public understands and trusts the central bank’s strategy, the policy response required to deliver a given disinflation can be smaller and less costly in terms of lost output,” Hauser said.
When people do not trust it, the central bank must raise rates aggressively to bring inflation back promptly, he added.
The RBA lifted rates to an 18-year high of 4.85% on Tuesday, leaving Australia with one of the highest policy rates among developed economies and more than fully reversing the easing delivered in 2025. Yet the decision was far from unanimous, with three board members voting against the hike.
The split underscored the worsening policy trade-offs as the economy slowed and unemployment climbed, with Prime Minister Anthony Albanese’s Labor government bearing much of the political fallout as households grappled with higher mortgage rates and cost of living.
With inflation running above the target band of 2%-3% for more than five years now, Hauser said it was the cumulative rise in prices that appeared to be fuelling public anger, adding that the pain of higher borrowing costs often came before the gains from lower inflation as monetary policy worked with a lag.
“While those lags are working through, and people are having to make difficult and costly adjustments, they need assurance that we’re acting competently,” said Hauser.
“Trust is no birthright. We never stop earning it – by continuing to listen, learn and level with the people we serve… And welcome scrutiny, including when outcomes fall short.”
(Reporting by Stella QiuEduiting by Shri Navaratnam)
