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The central bank has admitted its inflation forecasts significantly undershot reality in the past year.
The Reserve Bank of Australia is now addressing errors linked to "unforecastable shocks" and what in hindsight was an underestimation of the impact of COVID-19 related demand and supply imbalances.
But it was not the only one that got it wrong - the bank also pointed to financial markets, saying many economic forecasters were also remiss.
"As one of the largest economic shocks in a century, the inflationary effects of the pandemic-driven imbalance between supply and demand for goods both globally and domestically played an important role in the forecast miss," it said on Friday.
"Other unforecastable shocks - such as the effects of Russia's invasion of Ukraine and the Australian east coast floods - also contributed.
"The bank's inflation models (like most forecasting models) underestimated inflation over the past year, as it is difficult for forecasting frameworks to capture the signal from unprecedented events."
To address this, the bank is incorporating more information from its business liaison programs, surveys and international experiences into its thinking.
In its August 2021 quarterly Statement on Monetary Policy, the central bank predicted the consumer price index would range between 1.50 per cent and 2.50 per cent out to the year ended December 2022.
But the annual CPI rose by more than that, and the bank is now predicting inflation of eight per cent by the end of this year.
"None of the market economists the bank surveys nor any market-based measures predicted the extent of the pick-up in inflation," the RBA said in its latest Statement on Monetary Policy published on Friday.
