The Reserve Bank of Australia boss is under fire for comments she made at an international conference, dismissing frustration over rate hikes as “noise”.
RBA Governor Michelle Bullock spoke in Hong Kong on Tuesday at a meeting of central bank governors, which was also attended by her predecessor Philip Lowe.
The Australian central bank has raised interest rates thirteen times in the past eighteen months from 0.01 percent to the current rate of 4.35 percent, causing mortgage costs to skyrocket.
“We, like other countries, have been raising interest rates much faster than in the past, and that has actually created a lot of political noise and a lot of public noise,” Ms. Bullock said at the conference.
“Despite that noise, households and businesses in Australia are actually in a pretty good position. Their balance sheets are quite good.”
RBA Governor Michelle Bullock told a conference in Hong Kong this week about frustrations over ‘noise’ rate hikes
Ms Bullock said households had built up “large savings buffers” due to the Covid pandemic and these were “largely intact”.
“Housing prices are rising again, to everyone’s surprise, so that helps people feel a little richer.”
Governor Bullock said that as higher interest rates begin to curb inflation, the RBA needs to be “a bit careful” not to unnecessarily restrict economic activity.
“We want to make sure we keep inflation under control and get it back to our 2 to 3 percent range,” she said.
The central bank should “also ensure that we do that in the context of not imposing too much on the economy and increasing unemployment.”
Speaking to Sunrise host Nat Barr on Wednesday, journalist Justin Smith said “people are going to be angry” at the comments.
Journalist Justin Smith told Sunrise host Nat Barr that Ms Bullock’s comments provided an interesting picture of how someone in her position views the rate hikes.
‘They’re very old-fashioned in their approach, aren’t they? “They think they can go to a conference somewhere and say something and it won’t come back to us,” he said.
‘But it is a realistic picture of the way in which they think they describe the interest rate increases and what that does to people as noise.’
Barr noted that Australians had spent $6.36 billion on Black Friday sales.
“There is money in this economy. Someone is spending. Does she have a point?’
Financial journalist Deb Clay said the RBA’s “remit” was to look at the big picture or macroeconomic view.
“For example, when it comes to cafe spending, you know the numbers show that spending has increased,” she said.
“But try telling that to a cafe owner in Kellyville Ridge in Sydney’s northwest who doesn’t know if he’ll be able to keep his doors open for the next month.”
‘There is no person behind the story that Michelle Bullock and it’s telling, especially after some insensitive comments from Philip Lowe.”
According to RateCity, half a million Australians will soon switch to the much higher variable rate when their fixed rate term expires
According to RateCity, almost half a million mortgage holders are approaching the ‘mortgage cliff’.
The term refers to the expiry of thousands of ultra-cheap fixed rate home loans signed during the Covid pandemic, when the RBA cut cash rates to the low 0.1 per cent.
After these fixed interest periods, these mortgage holders will switch to a much higher variable interest rate.
RateCity estimates that around 155,000 mortgage holders will reach the precipice by the end of the year, while another 450,000 fixed-rate mortgages will mature in 2024.