RBA Governor Michele Bullock’s warning the bank won’t be ruling out further interest rate rises if inflation does not return to the target range is expected to spark fear among mortgage holders.
Ms Bullock during Senate Estimates on Wednesday reiterated the RBA is not ruling anything out when it comes to its monetary policy.
“If we think we’re on the narrow path, we can stay basically, pretty much where we are not ruling anything in or ruling anything out,” she told the Senate Economics Committee.
“But if it turns out, for example, that inflation starts to go up again or it’s much stickier than we think we’re not getting it down, then we won’t hesitate to move and raise interest rates again.”
Shadow finance minister Jane Hume labelled the warning “strident” in an interview with Sky News Australia, saying it was the RBA’s job to bring inflation down.
“And you’d certainly expect that that would put a chill down the spine of the thousands and thousands of mortgaged households out there that we know are really doing it tough after the 11 rate rises under this government,” Ms Hume said.
However Ms Bullock also offered a glimmer of hope to Australians, adding during Senate Estimates there was a possibility for an easing of rates.
“In contrast, if it turns out that the economy is much weaker than expected, and that puts more downward pressure on inflation, then we’ll be looking to ease so they’re the Plan B’s if you like, but they’re central to the strategy,” she said.
Ms Bullock refused to speculate on potential rate rises during an election campaign, saying the board will do what is necessary.
“I’m not speculating on any campaign periods,” she says.
“But the board will do what they think they need to do on inflation.”
Ms Bullock also revealed the RBA will not be taking into account Labor’s $300 energy rebates for all households.
“It is helping people who clearly are hurting at the moment. But I don’t think it’s material in terms of our forecast for inflation,” she said.
Ms Hume said she believed this was “worth teasing out a little bit further”.
“Because obviously the RBA’s forecast for inflation differs to that of Treasury’s and of the government’s in the budget,” she said.
“Even though they were made only six days apart and that’s something that we’ve been seeking to understand – questions to Treasury and also questions to the RBA today.”
Data released by the Australian Bureau of Statistics last week showed inflation had risen to 3.6 per cent in April, defying expectations for a 3.4 per cent rate.
Meanwhile core inflation remained steady at 4.1 per cent – well above the target two to three per cent range.