RBA governor Michele Bullock said the federal government's $300 energy bill rebate is unlikely to lower inflation or risk pushing it higher.
Responding to Nationals Senator Matt Canavan, Michele Bullock said the central bank would "look through" the rebate's impact on headline inflation and focus on the RBA's preferred "underlying" measure instead. "If you hand someone $300 and say 'here's $300', I think psychologically, they think of that differently.
To achieve this, the RBA can only control monetary policy by adjusting interest rates, however, any changes take time to flow through to the broader economy.Inflation is rising again, and that's a problem for both the government and the Reserve Bank, writes David Taylor.Since May 2022, the cash rate has risen from 0.1 per cent to 4.35 per cent — the highest interest rates have been since November 2011, and the steepest rate hiking cycle in the bank's history.
"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," she said. "We expect growth to be quite low, and that would imply per capita GDP to be declining," Ms Bullock said.
Asked by Senator Hume whether the federal government's budget was expansionary or contractionary, Ms Bullock replied it was a "very complex question" to answer.
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