How your cost of living was engineered — and who profits. In August the RBA wrote the oil shock down to "less than expected." Seven weeks later it hiked for the fourth time this year because energy prices were "much higher" than it had assumed. The reason rotated again. The rate only ever moved one way.
This page now links its evidence. Each numbered marker — like this [1] — jumps to the original document in the Sources list at the bottom. Most are the RBA's own statements, minutes and press-conference transcripts, plus ABS and IMF releases. Re-checking every claim turned up five things we got wrong:
1. A misdated quote. The Governor's line that energy prices "weren't the reason" for a hike came from the 17 March press conference, not 5 May. In May she said the opposite — "Australians are poorer because of this shock to oil prices."[1,2] The "May contradiction" in Section 05 has been corrected.
2. Profit-led inflation was never hidden. We said the research was "circulated internally and not published." The ECB, the IMF and the RBA itself all published on it; the RBA concluded profits weren't the main driver here, and the Australia Institute disputes that.[3,4,5] Exhibit D now says so.
3. "Supply" never disappeared. In September 2022 the RBA Governor said "global factors explain much of this increase in inflation."[6]
4. The shipping profit figure. Leading container lines made a record ~US$110 billion in combined operating profit in 2021 — not $150 billion from four lines.[7]
5. Two unsourced claims are now labelled. We could not find public sources for the 2012 "unpublished Treasury modelling" or the 2019 "fuel distributors lobbying" entries, so they are marked unverified rather than deleted.
We also note that on 29 September the written statement and the Governor agreed more than we said: both put domestic capacity pressures first, with fuel "in addition." And we added the IMF's full position — central banks can wait out an energy shock only while expectations stay anchored. The core argument stands: a rate rise cannot lower the price of diesel, and households are carrying the cost of a shock they didn't cause. It is stronger for being accurate.
On 29 September the Reserve Bank raised the cash rate to 4.60% — the fourth hike of 2026, unanimous, and the highest cash rate since 2011.[8,9] Now put the two statements side by side. 11 August: the impact of the Middle East conflict on inflation "has so far been less than expected." 29 September: "The conflict in the Middle East has broadened and global energy prices are now much higher than had been assumed in the August forecasts."[10,8] The oil shock went from footnote back to lead reason in seven weeks. In August it didn't justify a cut. In September it justified a hike. Whichever way the oil story pointed, the rate either held or rose.
Then, at the press conference, the Governor shifted the emphasis. Asked how much the war drove the decision, Michele Bullock said: "This isn't all about the Middle East conflict." The Board started from "a position of excess demand anyway."[9] It echoes March, when she said higher petrol prices would add to inflation "but they're not the reason for today's decision."[1] To be fair to the record, though, this is a difference of emphasis rather than a contradiction: the written statement itself says the fuel impulse is "in addition to the effect of capacity pressures," and Bullock opened her press conference by saying inflation "has been driven by domestic capacity pressures," with the Middle East impulse "in addition to this."[8,9] What changes from document to document is which cause gets the headline. What never changes is the answer: a higher rate.
She did say something new, and it matters. Bullock told reporters that fuel, fertiliser and transport prices are now "permanently higher," and that the idea they would go up and come back down "just hasn't happened."[9] The longer it lasts, she said, the more likely businesses are to pass costs on. That is the central bank conceding this page's core argument: a supply shock has become a cost floor. Its answer to a cost floor it cannot influence is still to raise the price of money for households.
The "fuel mirage" surfaced the next morning — exactly as flagged. The ABS released the August CPI on 30 September, one day after the decision. Headline inflation jumped from 3.5% to 4.0%.[11] Automotive fuel rose 14.8% in the single month of August as the last of the excise relief unwound and world oil prices climbed. And the trimmed mean — the number we told you to watch — sat at 3.6% for the third month running[11,9]. The "falling" inflation of June and July was the subsidy. Remove the subsidy and the headline went straight back to where it started the year. The Board itself said "higher fuel prices have partially been passed through to prices of other goods and services."
Who it lands on. The Governor acknowledged unemployment is now 4.6% — up from 3.5% — and house prices have fallen for five months.[9] She said a recession is "not our central base case," but conceded a scenario where one might be needed if inflation expectations "get away." She also said that, whatever happens next, rates are not going back to pre-COVID levels. Asked whether the rate tool was becoming detached from the problem — oil, AI investment, government spending — she said it "gets into all sorts of cracks."[9] Mortgage holders felt it in the first crack: higher repayments for variable loans from early October.
Marking the last update. We wrote in September that the Big Four said the RBA was finished for the year and the next move would be a cut in 2027. They were wrong within three weeks, and every one of them had switched to forecasting a September hike before the meeting. Markets now price a cash rate above 5% by May.[9] For context: the RBA's own May forecast assumed the cash rate would reach about 4.7% by the end of 2026 — in a baseline that assumed the conflict "is resolved soon." The conflict wasn't resolved. The rate is getting there anyway.
Where it goes next. The September-quarter CPI lands 28 October — the first full quarter with no fuel subsidy underneath it. The RBA decides again on 3 November. The Governor has said the Board "will increase interest rates again if that's what's needed." Watch which cause gets named this time — and whether the trimmed mean finally moves.
The Reserve Bank held the cash rate at 4.35% again on 11 August 2026 — a second consecutive hold, and once more unanimous.[10,12] Read the fine print and watch what quietly changed. The statement now concedes that "the impact of the Middle East conflict on inflation has so far been less than expected." For four months the oil supply disruption was the headline risk that justified waiting. In August it was demoted to a footnote — while the rate stayed exactly where three hikes had left it. The trigger got revised. The tool did not move. The same document then pivots the justification back to the demand-side language that started the cycle: capacity pressures, and firms "increasing the prices of their goods and services." When one reason for the rate fades, another is already loaded.
The headline number fell — and it fell on fuel, again. Annual CPI eased to 4.0% → 3.8% in June → 3.5% in the year to July, the softest print since November 2025.[13,14] But the RBA's preferred underlying measure, the trimmed mean, did not move at all: 3.6%, unchanged, still the highest since September 2024. The one measure that strips out volatile items like fuel refused to fall. That is the tell. If the underlying rate won't budge while the headline drops, the headline drop was never the underlying problem — it was the fuel line doing the work. The RBA has excluded automotive fuel from its core read since March precisely because it knows this.
And the fuel line has already turned back up. Automotive fuel rose 7.5% in July after falling three months in a row — the ABS attributes it directly to higher world oil prices and the partial unwinding of the fuel excise relief.[14] The full 52.6c excise returned on 3 August.[15] The subsidy that was flattering the headline is now switched off. On a monthly basis the CPI actually rose 1.0% in July — the first monthly increase in four months, and faster than economists expected. The "disinflation" lasted exactly as long as the fuel discount did. Watch the September quarter (late October) for the number with no subsidy underneath it.
Bullock said the quiet part again — a cut was never on the table. At the press conference the Governor confirmed the Board discussed only two options: hold, or hike.[16,17] A rate cut, she said, "is not on the agenda in the near term," and markets pricing cuts are "a bit ahead of themselves." She said plainly the economy needs "growth to slow" and "less tightness in the labour market." Translated out of central-bank register: the plan is to keep the pressure on households until unemployment rises. That is not a side effect of the policy. That is the policy — see Section 07.
Where it goes next. The next decision lands 28–29 September 2026. The Big Four banks now say the RBA is finished for the year and the next move will be a cut — but not until 2027. Around 44% of surveyed economists still think another hike arrives before December. The RBA itself is keeping the hike threat explicitly alive. Whatever the September-quarter print says, watch which part of it gets blamed — and whether the trimmed mean, the number that actually matters, has finally moved. — What happened: the Board hiked to 4.60% on 29 September, citing energy prices "much higher" than assumed. The Big Four's "next move is a cut" call was abandoned before the meeting. The August CPI then came in at 4.0%, with fuel up 14.8% in the month and the trimmed mean still 3.6%. See the update at the top of this page.
The Reserve Bank held the cash rate at 4.35% on 16 June 2026 — a unanimous decision, the first pause after three consecutive hikes this year (February, March, May).[18,19] On the surface this reads as relief. Read the statement and it reads as something else: the Board explicitly said it was holding "while it assesses the response to previous interest rate rises and the impact of the oil supply disruption." They did not say the oil disruption had passed. They said they were waiting to see how big the damage already done would turn out to be.
Inflation did not fall back into target. May's monthly CPI indicator showed headline inflation at 4.0% and the trimmed mean — the RBA's preferred underlying measure — at 3.6%, both still well above the 2–3% target band. Unemployment came in at 4.1% in April, higher than the Bank had forecast, which is normally a clear signal that an economy is slowing, not overheating. The hold did not happen because inflation was solved. It happened because three hikes were already in the system and the Board wanted to see what they'd done before adding a fourth.
Staff forecasts quietly moved the goalposts again. Released minutes show underlying inflation is now projected to stay above 3% until late 2027, only reaching the midpoint of the target band by mid-2028. That is two years from this update. The May minutes record Board members weighing a fourth hike against holding — the case for tightening cited capacity pressures and the risk inflation expectations could become "de-anchored"; the case for pausing cited risk that conditions were already tight enough and that prolonged conflict could sap growth. The case for waiting won, this time.
The next decision lands 10–11 August 2026. Westpac remains the only major bank forecasting a further hike, to 4.85%. CBA, NAB and ANZ have all shifted to forecasting holds through the rest of the year, pending the next quarterly CPI print. Watch what that print is blamed on. — What happened: the print came in soft on fuel, Westpac dropped its hike call before the meeting, and the Board held again on 11 August. See the update at the top of this page.
The Reserve Bank of Australia raised the cash rate by 25 basis points to 4.35% on 5 May 2026 — the third consecutive rate rise this year, bringing the rate back to 2024 levels. The vote was 8–1[20], significantly more decisive than the 5–4 split in March.
The official statement led with fuel. The RBA's May 5 statement acknowledged that "higher fuel prices are adding to inflation" and warned of "second-round effects on prices for goods and services more broadly."
Correction (23 October 2026): an earlier version of this update attributed to the 5 May press conference a quote in which the Governor said energy prices "weren't the reason" for the hike. The RBA's own transcript shows that remark was made on 17 March, three weeks into the war: "Higher petrol prices will add to inflation, but they're not the reason for today's decision."[1] On 5 May she said something closer to the opposite — "Australians are poorer because of this shock to oil prices and energy prices" — and warned that second-round effects "could lead to even higher and persistent inflation."[2]
◆ — Primary Source
The following is drawn directly from the RBA's official Monetary Policy Decision statements, Governor Bullock's press-conference remarks, the released meeting minutes, and a public speech by Deputy Governor Andrew Hauser. Read them side by side, and watch the justification quietly rotate while the rate only ever holds or rises.
"At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 4.60 per cent."
"Inflation remains elevated and some of the upside risks flagged in August are materialising. The conflict in the Middle East has broadened and global energy prices are now much higher than had been assumed in the August forecasts. AI-related demand is driving rapid growth in global prices for technology-related goods."
"Higher fuel prices have partially been passed through to prices of other goods and services. This inflation impulse is in addition to the effect of capacity pressures in the economy."
"The Board will continue to do what it considers necessary to bring inflation sustainably back to target, including increasing the cash rate target further if needed."
On the war: "It's made us all poorer in this country. That is a fact… fuel prices, fertiliser prices, transport prices, all these things now are permanently higher."
And then, on whether the war drove the hike: "This isn't all about the Middle East conflict. I want to make that clear… we did start from a position of excess demand anyway."
On recession: "That is not our central base case at this moment." On whether one might be needed: "Are there scenarios in which it might have to happen that way? I guess possibly."
On where rates settle: "We're not going back to where we were, certainly not in COVID, and probably not even where we were immediately pre-COVID."[9]
"At its meeting today, the Board decided to leave the cash rate target unchanged at 4.35 per cent."
"While the impact of the Middle East conflict on inflation has so far been less than expected, headline inflation is still too high. Trimmed mean inflation also remains elevated and is little changed from the March quarter. Oil and most related commodity prices remain higher than they were prior to the Middle East conflict."
"Some firms experiencing cost pressures are increasing the prices of their goods and services and others are looking to do so."
"With monetary policy judged to be somewhat restrictive, the Board decided to leave the cash rate target unchanged while it assesses how the economy is evolving."
The Board, Bullock confirmed, considered only two options — a hike or a hold. A rate cut was not discussed. "There was a diversity of views about how strongly people felt they were worried about inflation, but everyone was at least a little bit worried."
A near-term cut, she said, "does not align with the Board's thinking," and market pricing of cuts is "a bit ahead of themselves." The Board is "ready to raise rates if needed."
On what the Board is actually trying to achieve: the economy needs "growth to slow" and "less tightness in the labour market."
"At its meeting today, the Board decided to leave the cash rate target unchanged at 4.35 per cent."
"Following the three increases in the cash rate target since the beginning of the year, financial conditions are now tighter than they were, and there are signs that the economy is slowing as expected. But inflation is still too high and the Board judged that it was appropriate to leave the cash rate target unchanged while it assesses the response to previous interest rate rises and the impact of the oil supply disruption."
"This inflation impulse is in addition to the high inflation recorded around the start of 2026, reflecting capacity pressures in the economy. The Board remains focused on ensuring that inflation does not become embedded once the impulse from higher oil prices has passed through."
"There continue to be heightened uncertainties about the outlook for domestic economic activity and inflation. Resolution of the conflict in the Middle East is at an early stage, and there are plausible scenarios where inflation is higher and activity lower than envisaged under the May baseline forecasts."
Staff projected underlying inflation to remain above 3 per cent until late 2027, returning to the midpoint of the target range only by mid-2028.
"Arguments for tightening stressed strong capacity pressures, and that financial conditions were not sufficiently restrictive. Concerns also centred on inflation expectations becoming 'de-anchored' if elevated prices persisted."
"The case for pausing pointed to risks that conditions were already tight and that prolonged conflict could sap growth and labour demand."
Most members judged inflation risks had risen, concluding the 4.1 per cent cash rate at the time of the May meeting might not be enough to contain them — which is why the Board hiked to 4.35% in May, only to pause a month later.
"The Reserve Bank of Australia still has more work to do to bring inflation back to target." Price growth remains "too high," though lower global oil prices from a potential easing of tensions between the U.S., Israel and Iran would be "a positive development."
"The board began raising interest rates in February after concluding that demand was exceeding the economy's supply capacity by more than expected, fuelling inflation."
"Timely policy steps to reduce inflationary pressures, of the kind we have taken, should also have a proportionally smaller unemployment cost"[21] — explaining the tightening cycle through the lens of the Phillips curve and excess demand.
§ 01 — The Demand Myth
Here is what the Reserve Bank and Treasury officials will tell you: inflation is your fault. You spent too much. Too much demand chasing too few goods. The official line hasn't changed in forty years.
But look at the data. Real wages — adjusted for inflation — have been flat or falling for the majority of working households since 2008. So whose demand are we talking about? Who exactly has been spending so recklessly that it required emergency interest rate intervention?
The answer they don't put in the press release: it wasn't household demand at all. It was asset speculation, corporate credit expansion, and government stimulus funnelled through financial channels — none of which shows up in your supermarket receipt, but all of which inflates the monetary base.
Official narrative: "Excess consumer demand is driving prices higher. Households must tighten their belts."
Actual data: Household savings rates spiked during 2020–21 and have since collapsed — not because people were spending wildly, but because they were being forced to spend savings just to afford basics.
This is not a spending boom. It is a survival pattern being relabelled as excess demand to justify the policy response that follows.
§ 02 — The Supply Chain Racket
When COVID hit, the major logistics corporations declared force majeure on contracts, renegotiated rates, and consolidated market share as smaller competitors collapsed. Then they reported record profits. In a supply crisis. Simultaneously.
Supply chains didn't break because of bad luck. They broke because decades of "efficiency optimisation" — championed by consulting firms billing governments and corporations billions — had stripped out every redundancy. Just-in-time manufacturing. Zero buffer stock. Single-source suppliers. A system deliberately made brittle by the people who get paid again to fix it when it snaps.
§ 03 — The Fuel Multiplier
Let's talk about diesel. Not petrol — diesel. Because everything you eat, wear, use, or buy has been on a diesel-powered truck. Usually multiple trucks. The raw material comes on a truck. The factory inputs come on a truck. The finished good comes on a truck. The last mile to your door comes on a truck.
When diesel prices double, that cost is embedded at every single stage of that chain. Each business passes on their cost increase. The effect doesn't add — it compounds. A 100% rise in diesel does not produce a 5% rise in grocery prices. It ripples through four, five, six layers of logistics and lands on your receipt as something much larger.
And food hasn't even left the farm yet. Every tractor that turns the soil runs on diesel. Every seeder, every irrigator pump, every harvester — diesel. The grain gets loaded into a diesel truck, taken to a diesel-powered facility, processed and packaged, then loaded onto another diesel truck. By the time your bread hits the supermarket shelf, diesel has touched it at least six times before transport even begins. A doubling of fuel prices isn't a transport problem — it's a food production cost problem first, and a transport problem second, and they compound on top of each other all the way to your trolley.
And here is the part that belongs in a criminal indictment: the fuel excise is partly a percentage-based mechanism. GST — 10% of the total pump price — grows automatically with every price rise. When fuel doubles, the government's GST take from fuel doubles. Without passing any legislation. Without asking permission. The very inflation they claim to be fighting makes them richer in real time.
§ 04 — The Interest Rate Theatre
This is perhaps the most audacious piece of the operation. The RBA raised interest rates — aggressively, repeatedly — to fight inflation. The theory: reduce demand, cool the economy, prices fall.
The problem: the inflation was caused by supply chain collapse, fuel cost explosions, and corporate margin expansion. You cannot reduce the price of diesel by making mortgages more expensive. You cannot fix a broken supply chain by raising the cash rate. These are completely unrelated mechanisms.
The IMF said it plainly in April 2026: "This is a negative supply shock, and no central bank can influence global energy prices on its own."[25] (In fairness, the IMF added that central banks can look through an energy shock only "as long as inflation expectations remain well-anchored," and its Managing Director said that if they threaten to break loose, central banks "should step in firmly with rate hikes" — which is the RBA's stated reason.)[26,27] The RBA raised rates anyway. Three times in a row — then, by its own admission in June, paused specifically to watch what the oil shock would do next, which is itself a tacit concession that the rate tool was never going to touch the actual cause.
| Intended Effect | Actual Effect | Who Benefited |
|---|---|---|
| Reduce consumer spending | Mortgage holders lost $400–900/month extra repayments | Major banks |
| Cool housing market | Rents increased as buyers exited market | Institutional landlords |
| Reduce inflation | Inflation moderated to 4.0% headline — still 100bp+ above target | Corporations locked in new margins |
| Protect purchasing power | Real wages fell further behind | Shareholders |
| Restore economic stability | Unemployment rose to 4.1% — economy slowing, not overheating | Debt purchasers |
| Control fuel-driven inflation | Diesel/oil prices set globally. Strait of Hormuz disruption unresolved. | Nobody |
§ 05 — The Contradiction, Now in Two Acts
The March press conference produced the first gap between the written statement and the spoken explanation (we had originally dated it to May — see the correction in the May update). June produced a second — and it's a different one, told by a different official, which means it isn't a one-off slip. It's a pattern. September made it three.
Here is the pattern across multiple officials, four months, and several different audiences. In the formal statement — the document the markets and the public are meant to scrutinise — the language led with oil, fuel, and "second-round effects" while that framing was useful. In the public speech explaining the cycle's origin to an economics society audience, the language led with demand exceeding supply capacity, with the Phillips curve, with the orthodox justification for using the interest rate tool. Then in August, once the fuel story had done its work, the oil shock was quietly written down to "less than expected" — and the demand-side framing was reinstated to keep the same rate in place. Not all of these can be the dominant explanation simultaneously. One version is for the document trail. One is for the room. And the version on top at any moment is whichever one justifies keeping the lever exactly where it is.
§ 06 — The Expectation Loop
Once inflation is embedded in expectations, it sustains itself. Businesses raise prices pre-emptively because they expect costs to rise. Workers demand higher wages because they expect prices to rise. Landlords raise rents because they expect everything to rise. The original cause — the fuel shock, the supply chain crisis — is long gone, but the inflationary behaviour continues.
This is not an accident of economics. It is a known, documented mechanism. And it is extraordinarily convenient for anyone who has already repriced their goods, locked in new contracts, and is now collecting a permanently higher revenue stream while pointing at "wage-price spiral dynamics" in media briefings.
Corporate profit margins in the consumer goods, logistics, and energy sectors reached multi-decade highs during 2021–2023 — the same period inflation was highest. In a genuine cost-push inflation scenario, margins compress: costs rise faster than prices. When margins expand during inflation, it means prices are rising faster than costs.
Correction (23 October 2026): an earlier version said this research was "circulated internally and not published." That was wrong — it is public. The ECB published it in its Economic Bulletin, and ECB President Christine Lagarde said unit profits contributed around two-thirds of euro-area domestic inflation in 2022.[4,28] An IMF working paper reached a similar finding for Europe.[28] In Australia, the Australia Institute argued profits were the largest single contributor to inflation here[5] — and the RBA published its own answer in May 2023, "Have Business Profits Contributed to Inflation?", concluding that outside mining and energy, margins had changed little.[3] Critics of the profit argument call it an accounting identity rather than proof of cause.[29] So the honest version is not that the evidence was hidden. It is that the RBA looked, decided profits were not the driver here, and that conclusion is contested.
§ 07 — The One Lever Problem
If inflation was genuinely supply-driven, the fixes are well understood. Release strategic reserves to buffer fuel shocks. Legislate against price gouging in essential goods. Implement windfall profit levies on sectors that expanded margins during the crisis. Invest in supply chain resilience — domestic production, redundant logistics, buffer stock.
Every one of these policies was proposed. Every one was rejected, delayed, watered down, or referred to a committee that reported after the crisis passed. The one policy that was implemented — raising interest rates, three times, followed by a pause that is itself contingent on watching the same shock play out — is the only tool that transfers money from mortgage holders and small businesses directly to the banking sector.
Ask yourself: of all the tools available, why was that the only one they reached for?
| Crisis Type | Actual Cause | Rate Rise Effect | Verdict |
|---|---|---|---|
| Demand-pull inflation | Too much spending / loose money | Reduces borrowing, cools spending | ✓ Appropriate tool |
| Fuel-cost inflation | Diesel / energy price shock | Does not reduce fuel prices at all | ✗ Wrong tool entirely |
| Supply chain collapse | Logistics breakdown, shortages | Cannot rebuild supply chains | ✗ Wrong tool entirely |
| Profit-led inflation | Corporate margin expansion | Does not cap prices or profits | ✗ Wrong tool entirely |
The rate lever works in one of these four scenarios. Australia experienced all four simultaneously. They used the one tool anyway, three times — and have now paused not because the problem resolved, but because they are waiting to see how much damage the tool itself already did.
The limitation of the interest rate instrument in the face of supply-side shocks is not a secret — it is textbook economics, chapter three. When a journalist asks why rates are rising during a fuel crisis, the answer given is "to anchor inflation expectations." This is technically true and entirely misleading — it is the economic equivalent of treating a broken leg by giving the patient a painkiller. It manages the perception of the problem while the underlying injury goes unaddressed.
And while the painkiller wears off, the patient — that's you — has also been handed a larger mortgage repayment, a higher rent, and a cost-of-living that, by the Bank's own staff forecasts, will not return to where it was for another two years. Prices are sticky on the way up, and the corporations who raised them have already banked the difference.
The mechanisms described in this document are not theory. They are standard macroeconomic relationships documented in peer-reviewed literature, central bank working papers, and internal government modelling. The suppression is not of the data — it is of the interpretation, and of the question of who benefits from the official narrative.
Every numbered claim on this page now links to its source — see the Sources list below.
Numbered in the order they first appear on this page. RBA statements, minutes and press-conference transcripts are linked directly from rba.gov.au; ABS, IMF and ECB material from the publishers. Checked 23 October 2026.
Still being linked: the May 2026 minutes' staff projections, the March 5–4 vote, the Big Four bank forecasts, the economists' survey, mortgage-repayment ranges, savings-rate data and the 2021 freight-rate increase. Two claims (the 2012 Treasury modelling and the 2019 lobbying) are marked unverified in the text.