Govt spending not the big inflation challenge: RBA governor
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The news: Reserve Bank of Australia (RBA) governor Michele Bullock has told a Parliamentary Committee on Friday morning that the central bank and the Albanese government are "completely aligned" on both keeping unemployment as low as possible while also tackling inflation. But she said they had "different tools" to manage the challenges.
The context: Bullock reiterated earlier statements that the government running surpluses and banking the extra revenue has been "helpful" for the fight against inflation. She also pointed out that state governments have a role to play in terms of public demand but hit back at suggestions this was a major contributor to keeping inflation high.
The RBA kept rates on hold at 4.35% at the August board meeting but Bullock indicated that they were not anticipating a rate cut for about six months, despite other major economies starting to ease. The RBA and the government have been at odds about the state of the economy and the impact of cost of living policies on inflation. The RBA has maintained that the economy, overall, is "running a bit hot".
Treasurer Jim Chalmers spoke on The Conversation's podcast this week, where he also sought to talk down differences between his approach and the RBA. He said both the federal and state governments are “doing what they can” to try and help households grappling with cost of living pressures.
But he reiterated his view that claims the economy is running too hot are “difficult to sustain in the data” and there are areas that are “really quite soft”.
What they said: "The government and us are concerned about inflation ... we're all concerned about inflation," Bullock said.
"Public demand is not the main game at the moment," she said, listing consumption, trade and residential construction as "critical" and the areas of most uncertainty.
