Reserve Bank boss Michele Bullock fears Israel-Hamas war will further drive up inflation and fuel prices – and reveals who’s even more hated than her former boss Philip Lowe

The Reserve Bank’s new governor, Michele Bullock, has warned that the war between Israel and Hamas could drive up petrol prices and fuel inflation – and joked that there was someone more hated than her former boss.

Even before the October 7 Hamas attack, Australian petrol prices had risen 14 percent in a year, while inflation worsened again.

With motorists already paying more than $2 per liter for unleaded E10 petrol, Ms Bullock said even higher petrol prices could drive up inflation.

“At the moment we are a little more concerned about the potential impact of this on inflation,” she told an Association of Superannuation Funds of Australia forum on Wednesday.

Ms Bullock said consumers expect inflation to remain high and, after the shock of the Middle East conflict, they will continue to spend due to Russia’s 2022 invasion of Ukraine and the 2020 Covid pandemic.

“When we think about supply shocks and increased prices, you normally think, ‘Well, that’s probably OK. It will blow over,” she said.

The Reserve Bank’s new governor, Michele Bullock, has warned that the war between Israel and Hamas could drive up petrol prices and fuel inflation – and joked that there was someone more hated than her former boss.

“But the problem is that we’re getting shock after shock after shock, and the more we keep inflation high, even if it’s because of supply shocks, the more people change their thinking.

“And the more people adjust their inflation expectations, the deeper inflation is likely to become.”

A drop in the unemployment rate to 3.6 percent in September, from 3.7 percent in August, also adds to concerns about wage pressures that will increase inflation.

That’s because the RBA expects unemployment to rise to 4.5 percent by the end of 2024 to get inflation back to target.

The Reserve Bank’s 12 rate hikes in 13 months were the most aggressive since 1989, after Russian aggression following Covid lockdowns triggered a wave of inflation in early 2022.

But Ms Bullock suggested that former Qantas chief executive Alan Joyce was even more hated than former RBA governor Philip Lowe, who suggested in 2021 that he would keep interest rates at a record low 0.1 per cent until 2024 at the earliest would love.

“One of the things about the independence of the Reserve Bank – and I’m sure Phil said this and he would agree – is that because we are independent of government we can make tough decisions,” she said .

“And yes, he did a lot of politicking and I think he was knocked off by Alan Joyce.”

However, Ms Bullock has indicated that she is prepared to also make unpopular decisions after her seven-year appointment.

Her latest inflation warning was issued a day after minutes of the October RBA meeting showed that board members would have ‘a low tolerance for a slower return of inflation’ to the two to three percent target’ by mid-2025 than currently expected ‘.

Even before the October 7 Hamas attack, Australian petrol prices had risen 14 percent in a year as inflation worsened again (pictured is rubble in the Gaza Strip near a refugee camp)

But Ms Bullock suggested that former Qantas CEO Alan Joyce was even more hated than former RBA governor Philip Lowe (pictured in August), who suggested in 2021 that he would keep interest rates at a record low of 0 until 2024. 1 percent would keep. at the earliest’

The cash interest rate remained at an eleven-year high this month: 4.1 percent.

But poor inflation data for the September quarter, due on October 25, could lead to the RBA raising rates again on Melbourne Cup Day, November 7.

This would mark the thirteenth interest rate increase since May 2022 and bring the cash interest rate to a twelve-year high of 4.35 percent.

Inflation rose to 5.2 percent in August, compared with 4.9 percent in July, marking the first monthly deterioration since April.