RBA: Australians must 'get used to' higher supermarket prices as inflation nears target
Assistant governor warns staples such as milk and bread are unlikely to return to pre‑pandemic levels while the central bank signals further rate cuts as inflation moves toward the 2–3% midpoint
A senior Reserve Bank of Australia official told a finance industry conference on Tuesday that Australians should expect supermarket staples to remain more expensive than before the COVID‑19 pandemic, even as the central bank moves toward lower interest rates amid easing inflation.
Sarah Hunter, the RBA’s assistant governor in economics, said at the Australian Finance Industry Association conference in Sydney that the bank was not attempting to restore the overall price level to its pre‑pandemic state. "When you do your weekly shopping, it just costs that much more," she said, adding that prices for milk, bread, petrol and other staples were unlikely to fall back to earlier levels.
Hunter said the higher cost of living was "tough" for many households and acknowledged that some people remained in difficult circumstances. At the same time, she said measures of household stress were beginning to ease as wages grow faster than prices and fiscal policy and interest rates provided relief for some borrowers.
"We are now in a position where wages are growing faster than prices ... so the average worker is taking more home in real terms than they were a year ago," Hunter said. She pointed to the stage three tax cuts that took effect last year and a series of RBA policy moves as factors supporting household incomes. "If you have a variable mortgage, you've had three interest rate cuts," she added, referring to Reserve Bank reductions in February, May and August.
The RBA’s nine‑member monetary policy board cut the cash rate by 25 basis points in August to 3.6 percent, the first time the rate has been at that level since May 2023. The central bank said the reduction will lower monthly repayments for an average $660,000 mortgage by about $106. The August cut followed rate reductions earlier in the year and a pause in July that surprised some market participants.
Governor Michele Bullock has said the RBA now expects underlying inflation to remain "sustainably" in the middle of its 2–3 percent target range, a development that underpins the bank’s projection of further easing in the cash rate. "The forecasts imply that the cash rate might need to be a bit lower than it is today to keep inflation low and stable and to keep employment growing," Bullock told audiences in recent weeks.
Headline inflation has slowed, with a most recent reading of 2.1 percent — a four‑year low — aided in part by temporary electricity rebates of A$75 per quarter that have been extended through the end of 2025. Hunter said bringing inflation to the midpoint of the target remains a key priority for the RBA, and she expected inflation to hold near current levels in the near term.
On the labour market, Hunter described conditions as close to full employment overall but said pockets of tightness persisted. She cited difficulty in hiring tradespeople in some cities, notably Brisbane, and continuing strength in parts of Western Australia, including Perth.
The RBA’s messaging underscores a shift from the rapid rate increases of 2022–23 that were aimed at cooling inflation, toward a period of gradual rate relief as price growth moderates. For consumers, the bank’s officials signalled that while headline inflation has eased, the higher price level established during and after the pandemic will influence day‑to‑day costs for groceries and other goods for the foreseeable future.