RBA Governor Michele Bullock walked into the Senate Economics Legislation Committee on Thursday carrying numbers her own government cannot easily dispute — because some of the most damaging came from Treasury itself.

Bullock, together with Assistant Governors Sarah Hunter and Christopher Kent, appeared before the committee for her first public engagement since the May 5 rate decision lifted the cash rate to 4.35 percent — the third hike of 2026. According to InvestingLive's pre-hearing analysis, the three officials had "no incentive to sound dovish after three consecutive hikes," and markets priced roughly even odds on a fourth move in August.

The question senators pressed was whether Treasurer Jim Chalmers made that August hike more likely by widening the budget deficit in the year it was least affordable to do so.

The Numbers Nobody Is Talking About

Commonwealth Bank's analysis of the 2026-27 budget contains a detail that has largely escaped public attention. In the bank's reading of Treasury's own budget modelling, economic forecasts were built on a cash rate path that "includes another hike in August," according to CBA's published analysis. Treasury told the Treasurer, in other words, that the settings he chose would require further monetary tightening. The budget was delivered unchanged.

Those settings include a net new spending increase of $6.5 billion in 2026-27, driven by additional hospital funding to states, defence, Pharmaceutical Benefits Scheme listings, and infrastructure. The underlying cash deficit widens by $3.2 billion relative to 2025-26 — to $31.5 billion, an improvement of $2.8 billion compared to MYEFO per Budget Paper No. 1 — in the year when Treasury's own CPI forecast peaks at 5.0 percent for the June quarter, as read by CBA. CBA's own estimate for the same period sits at approximately 4.7 percent year-on-year.

CBA's economists were unambiguous: "The RBA will need the most help in 2026-27, when inflation is forecast to be at its highest." Fiscal policy, the bank concluded, should be working in the same direction as monetary policy. Instead, Labor chose to add $6.5 billion in net new outlays during its hardest inflation-fighting year.

'Total Demand Is Too High'

Bullock has not concealed her view on government responsibility. At a Senate hearing earlier this year, she confirmed that government spending contributed to inflation because "total demand is too high," acknowledging that public outlays are part of the aggregate demand the RBA is trying to restrain, according to MacroBusiness. At the May 5 media conference, she said governments providing households with more money "makes it harder to dampen demand," per CBA's budget analysis.

The Albanese government's response has been to describe its fiscal approach as "responsible." That characterisation is difficult to reconcile with a budget CBA judges "neutral to mildly expansionary" in stance — one that widened the deficit in the most inflationary year since the post-pandemic surge, delivered against explicit Treasury modelling that assumed the market cash rate path would include yet another hike.

The All-Tier Problem

The federal figure tells only part of the story. UBS chief economist George Tharenou estimates the total government deficit across all tiers — federal, state, and territory — will reach $147 billion, or 5 percent of GDP, this financial year, according to Switzer. He characterises the budget plainly: "The budget overall remains stimulatory." Tharenou pegs government spending growth at six to eight percent per year, with public sector wages rising around eight percent annually, and forecasts an August hike to 4.6 percent.

CBA's analysis reached a similar conclusion, warning that "the risk sits with further tightening by the RBA." A government that simultaneously raises spending, lifts wages for award workers and public servants, and refuses to narrow a deficit during peak inflation is not managing the economy cautiously — it is spending into the fire.

Today's Hearing

Senators on both sides probed Bullock on whether the June 15-16 board meeting is still live. Markets say effectively no — but August is a live question. The July 1 double impact — the fuel excise snap-back and the 4.75 percent minimum wage rise taking effect simultaneously — will land before the August 10-11 board meeting. The Q3 CPI data capturing that price shock arrives in late July, just before the board meets.

Thursday also brought a sliver of good economic news. The Australian Bureau of Statistics released April 2026 international trade data showing goods exports surged $3.18 billion, or 7.2 percent, driven by metal ores and minerals, lifting the seasonally adjusted trade balance by $2.8 billion.

The RBA's own forecasts show underlying inflation not returning to the two-to-three percent target band until 2027. Two more years of above-target prices.

Governor Bullock chose her words carefully. The budget documents had already said the quiet part aloud.