Public confidence in the Reserve Bank of Australia’s ability to bring inflation under control has weakened materially, even as broader institutional trust in the central bank remains largely stable. That was the central warning delivered by RBA Deputy Governor Andrew Hauser during a major address at the Australian National University on Thursday, November 5.
Speaking at the prestigious Sir Leslie Melville Lecture, Hauser pointed to sobering data extracted from the RBA’s proprietary Community Research Survey. This ongoing tracking study has gathered comprehensive responses from approximately 12,000 Australians across four distinct waves since February 2025.
According to the survey results, roughly 55 percent of respondents reported maintaining high or moderately high overall trust in the RBA as an institution—a metric that has held remarkably steady or even improved slightly over the past 18 months. However, when researchers dug deeper into the central bank’s specific execution of monetary policy, a starkly different picture emerged. Confidence in the Bank’s capacity to successfully meet its mandated policy objectives over the preceding and upcoming 12-month periods had, in Hauser’s own words, "fallen materially."
"Australians understand our inflation mandate and hold us accountable when we meet it," Hauser observed during his address, shedding light on a growing public divide between general institutional respect and direct performance evaluation.
The deputy governor’s candid remarks arrived on the heels of a significant and aggressive monetary policy decision announced earlier in the week. On Tuesday, the RBA board voted to raise the official cash rate from 4.60 percent to 4.85 percent, pushing the benchmark interest rate to its highest level in 18 years. The tightening cycle reflects the central bank’s ongoing struggle to corral a stubborn and worsening inflation outlook that continues to defy baseline projections.
Hauser chose not to offer any fresh signals or forward guidance regarding the timing of potential future interest rate increases. Instead, he utilized the platform to emphasize the critical necessity of preserving monetary policy credibility during an era characterized by persistent inflationary pressures and increasingly erratic global economic shocks. He warned the audience that escalating geopolitical tensions, the proliferation of tariffs, and rapid technological transformations are collectively eroding the reliability of traditional economic forecasting models, thereby rendering policy trade-offs far more complex and politically fraught for central bankers worldwide.
The Permanent Sting of Accumulated Price Increases
Delving into the root causes behind the deterioration of public confidence, Hauser attributed part of the sentiment shift to the cumulative, long-term impact of inflation on everyday household living standards. While official economic data may show that annual inflation rates are moderating and cooling down from their cyclical peaks, Australian households continue to grapple with price levels that are substantially higher than those experienced prior to the COVID-19 pandemic.
"A lower inflation rate doesn’t undo that accumulated increase," Hauser explained, arguing that the permanent upward shift in the absolute price level helps explain why the general public remains deeply dissatisfied even as the speed of price growth begins to slow.
He noted that consumer confidence across the nation remains exceptionally weak, with ordinary households universally identifying the cost of living and rising inflation as their primary economic anxieties. The survey insights suggest that the mere statistical progress toward achieving the central bank’s inflation target may not immediately translate into a restoration of public faith. Households do not evaluate monetary policy through abstract macroeconomic metrics alone; rather, they judge it through the daily, accumulated cost-of-living pressures that they continue to experience at the supermarket checkout, the fuel pump, and in their utility bills.
Emerging Uncertainty in Long-Term Business Expectations
While households struggle with immediate price realities, concerns are also beginning to bubble up regarding longer-term inflation expectations within the corporate sector. During his lecture, Hauser cited findings from Macquarie University’s Business Outlook Scenario Survey, which revealed a growing trend of uncertainty among commercial firms. Increasingly, businesses are questioning whether the RBA will successfully steer inflation back into its target band over a five- to ten-year horizon.
Similar cautionary signals have filtered back to policymakers through the central bank’s extensive business liaison program, where executives express ongoing caution about wage demands, input costs, and pricing power.
However, Hauser explicitly acknowledged a notable gap in Australia’s economic data toolkit: the country currently lacks a reliable, high-frequency measure of households’ longer-term inflation expectations. This data limitation makes it difficult for economists to definitively conclude whether the same psychological deterioration occurring in business boardrooms is mirrored across the broader consumer base.
This distinction is far from academic. Confidence in a central bank’s unwavering capability to restore and maintain price stability plays a vital psychological role in anchoring future pricing strategies and wage-setting behaviors across the economy. Growing uncertainty regarding the eventual achievement of the inflation target therefore presents a subtle yet potent challenge to keeping long-term inflation expectations firmly anchored. While Hauser clarified that available evidence does not yet establish that longer-term expectations have become entirely unanchored, the warning signs are clear and demand constant vigilance.
Navigating a More Unpredictable Global Landscape
The timing of Hauser’s address underscores the delicate high-wire act currently facing monetary policymakers in Canberra and across the globe. As central banks battle stubborn domestic price pressures, they must simultaneously navigate a hazardous external environment where traditional macroeconomic guideposts are losing their utility.
Reflecting on the unprecedented hurdles confronting monetary authorities in the modern era, Hauser concluded his remarks with a stark appraisal of the current socio-economic climate: "Just as we need it most, trust is under strain."
His remarks serve as an institutional acknowledgment that the RBA’s mandate extends far beyond simply manipulating interest rates to return consumer price inflation sustainably to its targeted 2 to 3 percent band. To succeed in its ultimate economic mission, the central bank must also successfully maintain and actively repair public confidence in its competence, transparency, and capacity to deliver stability for all Australians.
