The RBA will hike rates again but inflation is testing the bank’s most valuable asset

September 24, 2026 — 5:00am

You have reached your maximum number of saved items.

Remove items from your saved list to add more.

Last weekend I paid $70 for a rosemary and garlic butterflied chicken at my local farmers’ market. Although it was delicious, I mention this not to show off. I am mortified that I failed to check the price before getting drawn into a conversation with the farmer about how the unusually warm winter had increased chicken sizes.

Still, it proves that $70 chickens exist, and other customers paid just as much.

I cannot say how much of the price reflected higher feed and fuel costs, packaging or garlic. But it appeared to have more to do with supply pressures linked to geopolitics and bird flu precautions than surging demand from discerning chicken lovers. There was no queue, let alone a bidding war.

It raises important questions for the Reserve Bank. How does it fight inflation when price rises are not driven by strong demand? When it cannot change agricultural conditions or the quantity of oil coming from the Middle East, how does it convince us it has inflation under control?

Its credibility depends on it, and credibility is a central bank’s most valuable asset.

Unfortunately, the answer is to curb demand by a fourth rate rise this year and possibly a fifth, to slow an economy that grew by just 2.1 per cent in the year to the June quarter.

The Reserve must respond not only to global supply constraints from wars, weather and energy prices but also to domestic demand in food,........

© The Age