The chart that reveals how inflation fears have been growing among Australia’s top bank bosses – as RBA governor delivers dire warning about Albo’s cash splash
The Reserve Bank is twice as concerned about inflation as it was a year ago, based on the statements made with each interest rate decision.
The cash rate was left unchanged at a 12-year high of 4.35 percent on Tuesday, but the accompanying statement mentioned the word “inflation” 24 times.
By comparison, “inflation” was mentioned thirteen times in the July 2023 statement, when Philip Lowe was still in charge.
Since Subsequently, the use of this word to describe price pressures has increased, peaking at 25 in the May 2024 statement.
This is despite the fact that the consumer price index has halved from 7 percent in the March quarter of 2023 to 3.6 percent in the March quarter of this year, based on annual price increases for all items.
However, inflation is still well above the RBA’s target of 2 to 3 percent and is not expected to fall within that range until late 2025.
The RBA’s statement on Tuesday ahead of its June meeting hinted that government spending was adding to inflationary pressures, while energy cuts were left out.
“Recent budget results may also have an impact on demand, although federal and state energy cuts will temporarily reduce headline inflation,” the report said.
The Reserve Bank is twice as concerned about inflation as it was a year ago, based on the statements made with each interest rate decision
RBA Governor Michele Bullock clarified that government budgets were one factor driving demand.
“I think the board’s conversation today was not specifically about budgets, but about the overall context,” she said.
‘I don’t think there is much point in thinking about the Budgets separately.’
Treasurer Jim Chalmers called a hastily arranged media conference on Tuesday afternoon to follow Ms Bullock’s press conference and reject any suggestion that Labour’s spending would increase inflation.
‘The second issue is about the role of the budget. “I don’t tell the governor how to do her job, and the governor doesn’t tell me how to do my job,” he said.
“We are focused on responsible economic management, which revolves around fiscal recovery, helping with the cost of living and fighting inflation without destroying the economy.”
Dr. Chalmers announced in May a budget surplus of $9.3 billion for the 2023-2024 period, marking the first consecutive surpluses since 2006 and 2007.
He was also the first Labor treasurer since Paul Keating in 1989 to achieve the feat.
But shortages are forecast from 2024 through 2025, based on falling iron ore and coal prices cutting Commonwealth companies’ tax revenues.
RBA Governor Michele Bullock clarified that government budgets were one factor driving demand
Treasurer Jim Chalmers called a hastily arranged media conference on Tuesday afternoon, after Ms Bullock’s media conference, to reject any suggestion that Labour’s spending would increase inflation.
Prime Minister Anthony Albanese’s government is giving every household a $300 energy bill credit, through rebates of $75 every quarter from July 1, regardless of their income.
The budget also provided for tax cuts in the revised phase three, which Ms Bullock said would likely boost spending.
“So it is possible that consumption growth will also be somewhat stronger,” she says.
However, state governments announced budget deficits this month.
Queensland’s Labor government, the underdog in October’s state election, last week unveiled a $2.182 billion budget deficit for 2023-2024, just eight months after announcing a record $13.93 billion surplus for 2022-2023, largely from royalties on coal.
Labor in that state is spending $107.262 billion over four years on ‘Big Build’ infrastructure programs as Prime Minister Steven Miles tries to win his party a fourth consecutive term.