This paper investigates the relationship between expected inflation and the nominal interest rate using Australia data. Recently developed time series techniques are used that allow for estimation across different regimes where the timing and number of structural breaks are not known a priori. The results are consistent with the existence of significant structural breaks in the relation between interest rates and inflation, with there being some evidence that these are associated with changes in taxation. After allowing for the structural breaks, it appears that interest rates fail to fully reflect anticipated inflation.