RBA Governor — Capital Brief

The news: Reserve Bank of Australia (RBA) Governor Michele Bullock told a parliamentary committee on Friday morning that the central bank and the Albanese government were “completely on the same page” when it came to keeping unemployment as low as possible while tackling inflation, but she said they had “different tools” to deal with the challenges.

The context: Bullock reiterated previous statements that the government's surpluses and the savings from the additional revenues are “helpful” in fighting inflation. She also noted that state governments play a role in public demand, but rejected the claim that this is a major contributor to high inflation.

The RBA kept rates at 4.35% at the August board meeting, but Bullock indicated they did not expect a rate cut in the next six months, despite easing in other major economies. The RBA and the government have been at odds over the state of the economy and the impact of cost-of-living policies on inflation. The RBA has claimed that the economy as a whole is “somewhat overheated.”

Speaking on The Conversation podcast this week, Treasurer Jim Chalmers also sought to downplay the differences between his approach and that of the RBA, saying both the federal and state governments are “doing what they can” to help households struggling with cost of living pressures.

However, he reiterated his view that the claim that the economy is running too hot is “difficult to substantiate with the data” and that there are areas where the economy is “really quite weak”.

What they said: “The government and we are concerned about inflation… we are all concerned about inflation,” Bullock said.

“Public demand is not the most important thing at the moment,” she said. She described consumption, trade and housing as “critical” and subject to the greatest uncertainty.