Michele Bullock did the expected by keeping rates on hold, but there’s nervous uncertainty about what the next move will be.
Michele Bullock’s first big day out as Reserve Bank governor was largely overwhelmed by the global jitters., as widely expected, at 4.1 per cent couldn’t compete with increased concern about sharply rising yields on US 10-year bonds and confusion about where rates elsewhere are headed.reflected those broader forces, backed by a round of hawkish rhetoric from US Federal Reserve officials.
In Australia, that translates into petrol prices at well over $2 a litre, helping to push headline inflation back up a littleThe country’s inability to build enough new homes, especially while population growth is being supercharged by high levels of immigration, also means rent inflation has become a particular pain point. Rising power prices are going to prove just as difficult, politically and economically.
In the traditional monthly statement from the RBA governor, Bullock echoed similar sentiments to those so regularly expressed by her predecessor, making the obvious point that “there are significant uncertainties about the outlook”.She noted “surprisingly persistent” inflation overseas in the price of services, saying the same could happen in Australia, given that the prices of many services are “continuing to rise briskly”.
The result, as anticipated, is the RBA concluding that further tightening may be necessary, but this will depend on the data and the “evolving assessment of risk”. This politely ignores the evidence that there is absolutely no chance of that productivity lift occurring. And certainly not in any timeframe consistent with the RBA’s target for inflation. Business is unusually united in arguing that the government’s proposed industrial relations changes will only make the productivity struggle even tougher. But these are now stalled in the Senate until next year.
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