RBA chief faces grilling over go-slow on rate cuts
Questions about the central bank’s decision to keep interest rates on hold will be levelled at Reserve Bank governor Michele Bullock at her regular parliamentary grilling.
The RBA board has yet to declare victory in Australia’s war on inflation and on Tuesday kept the interest rate on hold, bringing up a calendar year since the last rate rise.
Ms Bullock and Assistant Governor Chris Kent are due for a hostile reception on Thursday, with Greens Senator Nick McKim likely to press them on why they have still not dropped the cash rate from 4.35 per cent.
Senator McKim called on the government to override the central bank and use its powers to cut rates back in September, when the quarterly inflation rate still read 3.8 per cent.
That figure is now back within the RBA’s target band at 2.8 per cent.
But the board in its post-meeting statement on Tuesday said it would be “some time yet before inflation is sustainably in the target range and approaching the midpoint”.
The bank’s preferred measure of underlying inflation, the trimmed mean, is still at 3.5 per cent and proving much stickier, given elevated services price growth.
“While headline inflation has declined substantially and will remain lower for a time, underlying inflation is more indicative of inflation momentum, and it remains too high,” the board said.
The jobs market was still running too hot for Ms Bullock’s liking, even though the RBA increased its peak unemployment prediction to 4.5 per cent from 4.4 per cent.
“A range of indicators suggest that labour market conditions remain tight, and while conditions have been easing gradually, some indicators have recently stabilised,” the board said.
It also said demand in the economy still exceeded supply.
Treasury secretary Steven Kennedy said public spending, especially on state infrastructure megaprojects, had been a strong contributor to demand over the past year.
“We have seen some early signs it is easing … but there’s still a significant pipeline there,” he told a Senate estimates hearing on Wednesday.
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