• Reserve Bank of Australia Governor Michele Bullock expresses reduced concern about inflation, noting it is now within the 2–3% target range.
  • The RBA has cut the cash rate by a cumulative 75 basis points in 2025, reflecting growing confidence that monetary policy is working as intended.
  • Underlying inflation (trimmed mean) stood at 2.7% for the year to June 2025, down sharply from its 7.8% peak in 2022, while unemployment remains historically low at 4.2%.

Reserve Bank of Australia Governor Michele Bullock has signaled a notable shift in tone, indicating that the central bank's concerns about inflation have substantially diminished as price pressures have returned to within its target band.

With underlying inflation, measured by the trimmed mean, falling to 2.7% for the year to June 2025—a sharp decline from the 2022 peak of 7.8%—and headline inflation at 2.1%, Bullock stated that monetary policy is "working as intended." This assessment comes as the RBA has delivered a cumulative 75 basis points of rate cuts this year, a clear signal of its growing confidence that the inflation battle is being won without damaging the labor market.

"We're seeing the outcomes we were hoping for," Bullock said in recent remarks, according to people familiar with the discussions. The central bank's policy remains firmly data-driven, with future adjustments hinging on updated labor market and inflation readings.

The Australian economy presents a picture of successful disinflation alongside remarkable labor market resilience. Unemployment remains at a historically low 4.2% as of August 2025, with participation rates near record highs. This combination has allowed the RBA to pursue a more gradual normalization path than some international peers, avoiding the aggressive tightening seen elsewhere.

Efforts to manage the economy's soft landing are ongoing, however. Australian households continue to feel the residual effects of the significant price increases during 2022–2024, with cost-of-living pressures remaining particularly acute for vulnerable populations. The RBA's communication emphasizes that while inflation is back within target, the higher price level from previous inflation persists.

Looking ahead, policy is expected to remain steady barring any significant data surprises. The central bank will closely monitor the September 2025 quarter data and forward indicators, with most economists interpreting the current stance as one of cautious optimism. The RBA's updated Statement on the Conduct of Monetary Policy, formalized in July 2025, continues to anchor expectations around the dual mandate of price stability and full employment.

In a move that will provide more frequent data points, the RBA will introduce a monthly CPI release starting in November 2025, though officials have indicated they will continue prioritizing the quarterly trimmed mean as their core measure during a transition period.

Global risks from trade tensions and slower growth persist but appear less acute than previously feared, according to the RBA's assessment. While Chinese economic data has been weaker than expected and U.S. indicators remain mixed, these external factors haven't derailed the domestic disinflationary trend.

Correction: An earlier version of this article misstated the current unemployment rate. It is 4.2% as of August 2025.