RBA Deputy Governor Warns: Trust Reserves Will Eventually Run Out, Rate Hikes to Fight Inflation Are Overdrawing Public Goodwill

Title context: RBA Deputy Governor Warns: Trust Reserves Will Eventually Run Out, Rate Hikes to Fight Inflation Are Overdrawing Public Goodwill Text: Reserve Bank of Australia Deputy Governor Andrew Hauser said he was surprised that public trust in the central bank remains solid after it raised interest rates sharply to curb stubbornly high inflation. "Over the past 18 months, our overall trust metrics have been broadly stable, even edging higher," Hauser said in a speech in Canberra on Thursday. "That is a welcome resultbut frankly also a surprising oneduring a period of rising interest rates and inflation well above target," he said, referring to the RBA's 2% to 3% inflation target range. The RBA raised rates this week for the fifth time in 2026, lifting the cash rate to an 18-year high of 4.85%. That is likely to squeeze mortgage holders, who are grappling with rising fuel prices, cost-of-living pressures, rising unemployment and a softening housing marketall of which are pushing consumer confidence into deeply pessimistic territory. RBA Raises Rates to Highest Level Since 2008 Hauser said the RBA has collected feedback from 12,000 Australians through surveys since early last year. He acknowledged that the positive result may also reflect trust the central bank built up in earlier periods. "These trust reserves may protect trust from poor economic outcomes for a while, but they can run out," the central bank's No. 2 official warned. The RBA began raising rates in February this year to guard against inflation, which had already begun accelerating even before the US-Iran war triggered a global oil price shock. Since late 2021, the bank has consistently failed to reach the 2.5% midpoint of its inflation target. "Unsurprisingly, people's trust in our ability to meet our target in the near termwhether looking back a year or ahead a yearhas fallen sharply," Hauser said. The RBA operates under a dual mandate aimed at price stability and full employment. Hauser's remarks come as RBA officials are increasingly worried about the risk that rising inflation expectations could become entrenched. Last month, he noted that a growing number of businesses see 3% to 3.5% inflation as the "new normal."