It’s extremely convenient for Jim Chalmers that Australia’s central bank is in a vulnerable position because it means that Reserve Bank governor Michele Bullock will be reluctant to call him out.
Bullock, of course, has been talking tough on inflation. Last week, she noted the RBA board had a “low tolerance for allowing inflation to return to target more slowly than currently expected”.The board, she said, “would not hesitate” to raise rates if there was a “material” upside change to the inflation outlook.
After all, the whole point of raising interest rates is to dampen demand. But when the population is growing so rapidly, the new arrivals give a strong boost to domestic demand, fuelling inflationary pressures. Bullock, however, will be aware that it’s not a good time to be picking a fight with the Treasurer by drawing attention to the fact that government policies are playing a major role in driving inflation.
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