The Reserve Bank of Australia must do more to explain its decisions to the public, deputy governor Andrew Hauser has said, days after interest rates were raised to their highest level in 18 years.
Speaking in Canberra, Mr Hauser said surveys suggested trust in the central bank had remained surprisingly stable despite the rapid tightening of monetary policy in recent years. But he warned that confidence could quickly be lost.
“Trust is hard won and easily lost,” he told an audience at the Australian National University.
Annual inflation reached 4.3 per cent in September and, apart from a brief period in early 2025, has remained above the midpoint of the Reserve Bank’s two to three per cent target range since the end of the Covid-19 pandemic.
Mr Hauser said high inflation had fuelled rising anger around the world, but argued that preserving trust in the RBA was more important than maintaining the popularity of its board members.
He said confidence that the central bank was capable of doing its job and acting in the public interest was essential to bringing inflation under control.
“For a central bank, trust is not a nice-to-have. It’s integral to how monetary policy works,” Mr Hauser said. “When people trust us to deliver the goals we’ve been asked to pursue, policy is more effective and less costly.”
He cited former US Federal Reserve chairman William McChesney Martin’s description of a central bank as a “chaperone who has ordered the punch bowl removed just when the party was really warming up”.
“Taking away the punch bowl is rarely a way to win instant popularity,” Mr Hauser said. “The question is whether people can see why the difficult decision is necessary, even when its immediate effects are unwelcome.”
The RBA has repeatedly stressed the importance of keeping inflation expectations “anchored”. If inflation remains above target for longer, households and businesses may become less confident that price growth will be contained over time.
That could influence the prices businesses set and the pay rises sought by employees and unions. While longer-term inflation expectations have remained anchored in financial markets, businesses have increasingly told the RBA they are less certain the inflation target will be achieved over the next five to 10 years.
Mr Hauser said it was the central bank’s responsibility both to bring inflation down and to explain why its decisions could cause short-term pain in pursuit of longer-term economic benefits.
