RBA’s Bullock warns inflation persistence may require renewed tightening

RBA Governor Michele Bullock told the Senate Economics Legislation Committee that the bank remains on high alert for renewed inflation pressure and is prepared to act if price gains prove “more persistent” than expected. She noted that upcoming data in the next few months will be crucial in determining whether demand pressures are easing, adding that officials may still have to pivot back toward tightening if inflation shows signs of regaining strength.

Facing questions on past budget and inflation mis-projections, Bullock conceded the RBA “hasn’t done it yet” in bringing inflation sustainably back to target, and must continue working toward that objective. She stressed that the board must “keep working on this”.

With national debt set to exceed AUD 1 trillion and a deficit of AUD 42 billion projected, she noted that lower public and private savings—if paired with unchanged investment—could “put upward pressure on the neutral rate,” she said.”

But she added that that such an outcome is possible but contingent on both domestic and global forces. She emphasized that while the RBA can respond to domestic dynamics, but we don’t control global factors.”