Inflation remains top of mind as the Reserve Bank of Australia continues to keep interest rates on hold at a time when the United States Federal Reserve signals that it will start cutting rates.
Author
Michelle Grattan
Professorial Fellow, University of Canberra
One of the new lead architects behind the RBA's thinking is Deputy Governor of the bank Andrew Hauser. Hauser formerly worked at the Bank of England and was chosen by Jim Chalmers, the first-ever senior appointment from overseas.
Hauser is just back from a meeting of central bankers in the United States at which the Chair of the US Federal Reserve, Jerome Powell, indicated it was time for US rates to fall. Will that produce a rethink in Australia where the Reserve Bank has flagged rates are likely to stay on hold until next year?
Obviously, a significant part of the inflation story over the past two or three years has been a global story. It's been related to global supply chains. It's related, obviously, to the fallout from COVID and the impact of all of that on global demand.
But no. The decision on interest rates for the U.S. is for the U.S. to make. The decision on Australian rates is for the RBA and for the Australians to make, and we're obviously […] hopeful that in due course we would follow suit. But we have to take account of the outlook for inflation in Australia. And inflation unfortunately is still a little bit too high at the moment.
Sadly, at the moment Australian inflation is a bit stickier than it has been in the US. And there's a variety of reasons for that.
We're not yet as confident, as Jay is in the US, that inflation in Australia is back on a sustainable path, back to target. And therefore we have to hold, rates where they are for the time being.
On the delicate balance of reducing inflation and maintaining employment:
We have made a very conscious decision to set policy to bring inflation down, but to bring it down slowly enough that we protect the employment gains.
And the employment gains in Australia have been quite stunning, actually. Even now, the numbers that are coming through in the monthly releases, where people have been predicting an imminent downturn in the labour market, it could still happen, but even now, […] we are creating jobs at a pretty spectacular rate.
On his controversial speech questioning the certainty with which people proclaim about economic issues, which caused a stir among some commentators, Hauser says:
Look, frankly speaking, I think Australians would have every right to be bloody annoyed at a foreigner lecturing them to shut up and agree with the central bank, which would go down like a bowl of sick if an Australian tried to do that in the U.K. as well. But that wasn't what I was trying to do it at all. In fact, it was the exact opposite. I was trying to make the case for humility but not for a lack of diversity of views.
I've loved my short time in Australia so far, and I'm here to listen, learn and serve. And it's been quite nice actually - [I] had quite a long list of people sending their private support for the messages I was trying to give in the days after the speech.
Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
