Governor Michele Bullock was walking the Senate Estimates tightrope this morning, dissing the impact of the budget energy rebates. Michael Pascoe reports from Parliament.
A week after the Reserve Bank’s chief economist bought Jim Chalmers’ assessment of the budget’s impact on the CPI – a cut of half a per cent – her boss has effectively dissed it in Senate estimates.
Rate cuts coming? RBA buys Labor’s Budget massage for inflation
Under questioning from Senator Matt Canavan on Wednesday morning, Governor Michele Bullock ventured the bank would look through the energy rebates’ impact on headline CPI and that the rebates would have marginal impact on the underlying “pulse” of inflation.
The tricky thing here is that the RBA is mandated to target the headline CPI, not the trimmed mean or any other measure of the “pulse”. The CPI starting with a 2, putting it within the mandated target, would not be possible to look through.
Governor Bullock also poured cold water on an AFR ($) interview with her new deputy, Andrew Hauser. The AFR reported or suggested Mr Hauser found there was novelty in the bank’s amended formal agreement with the Treasurer:
“Asked to rationalise the RBA’s 4.35 per cent cash rate being lower than the United States, New Zealand, Canada and the United Kingdom, Mr Hauser pointed to the RBA board’s formal agreement with Dr Chalmers that was amended in December.”
“The statement on the conduct of monetary policy included a sharper focus on achieving full employment and low inflation, following an independent review of the central bank and the Albanese government’s employment white paper.”
“We have a dual mandate,” Mr Hauser said. “That was clarified and strengthened in the statement of the conduct of monetary policy last December. “We are asked by the Australian public to bring inflation down, but to do so in ways to protect the employment gains.”
Questioned about that interview, Ms Bullock basically said there was nothing to see here – the bank had long had the dual responsibilities, nothing had been changed by the December wording.
Having one’s nails done
The first session of the governor’s estimates appearance might be best known as the “having your nails done” example. Twice when asked to explain what was what with inflation, the old demand stronger than supply story, Ms Bullock cited the discretionary service of having one’s nails done.
As interest rates bite, you might cut back to having your nails done twice a month instead of four times, she said.
That sidesteps the prime examples of inflationary pressure coming from insurance premiums and rent – neither being discretionary, neither impacted tighter monetary policy.
The main game being played when the RBA fronts parliamentary committees is for Opposition members to somehow coral the bank into helping them score political points. It has always been thus.
Michael Pascoe is an independent journalist and commentator with five decades of experience here and abroad in print, broadcast and online journalism. His book, The Summertime of Our Dreams, is published by Ultimo Press.