Anthony Albanese has reacted angrily to Reserve Bank claims that government spending is fuelling inflation.
The prime minister was on the defensive even before RBA governor Michele Bullock hinted that government spending was adding to inflationary pressures.
“We’ve had two budget surpluses,” he told ABC News Breakfast host Lisa Millar on Thursday.
“That’s two more than our predecessors managed to produce after almost ten years in power. They promised a surplus in their first year and every year thereafter.”
On Thursday evening, Ms. Bullock reiterated her concerns about government spending adding to inflationary pressures.
“When it comes to fiscal policy, governments have a role to play and I have a role to play,” she told the Rotary Club of Armidale in northern New South Wales, where she grew up.
‘It is my job and that of the Reserve Bank to reduce inflation.
‘Governments have another job: they also have to reduce inflation, and they recognise that, but they also have to provide services and infrastructure for the Australian people.
Anthony Albanese has angrily rejected Reserve Bank suggestions that government spending is fuelling inflation
“They have to do that, but at the same time they have to focus on keeping inflation low.”
Ms Bullock has spoken out again on fiscal policy, two months after the Reserve Bank issued a warning over government spending.
“Recent budget results may also impact demand, although federal and provincial energy cuts will temporarily lower inflation,” the ministry said in a statement at the June meeting.
The federal government’s May budget proposed a $300 electricity rebate in four $75 installments.
But the energy credits, for which no income test applies, expire at the end of June next year, which will cause energy prices to rise again.
The Queensland Labor government, facing a tough re-election campaign in October, is offering even more generous $1,000 credits that will be automatically added to customers’ accounts in the 2024-25 budget year.
Finance Minister Jim Chalmers, a Queenslander, on Wednesday rejected a proposal that electricity rebates would only provide temporary relief before energy prices rise again.
“Not at all. I mean, first of all, there’s nothing artificial about helping people with their cost-of-living pressures,” he told ABC Radio National broadcaster Patricia Karvelas.
The prime minister turned defensive even before RBA governor Michele Bullock reiterated her concerns about the Labor government’s spending at state and federal level, which is keeping inflation high.
The Reserve Bank this week left interest rates unchanged at 4.35 percent for the 12-year period, but on Thursday evening Bullock reiterated her claim that there will be no rate cuts before February next year.
“We don’t expect interest rates to fall anytime soon,” she said.
“It’s just that at this point, given the current inflation and employment growth that is still quite substantial, we can’t think of anything that would allow us to cut rates.”
Ms Bullock also pointed out that the cash rate in Australia is lower than the corresponding policy rates in the United States, the United Kingdom, New Zealand and Canada.
“Remember, we didn’t go up as far as the rest,” she said.
“We may be a little less restrictive than the rest, so we have to be a little bit careful.”
The Reserve Bank this week updated its forecasts, which expect inflation to remain high at 3.7 percent in December 2025.
The consumer price index was not expected to fall within the RBA’s target range of 2 to 3 percent until December 2026.
Ms Bullock said it would take a severe global financial shock for the Reserve Bank to offer early relief to mortgage holders in 2024, who are facing the steepest interest rate rises since the late 1980s.
“Is there anything that would change my opinion? No, there is nothing,” she said.
‘Unemployment is one, inflation is another, and a dramatic change in conditions abroad that really affects our trade, for example.’