The Reserve Bank governor says letters from distressed borrowers make reading difficult, but push the central bank to achieve its goals of helping Australians.
Michele Bullock acknowledged the pressure higher interest rates put on mortgage holders, telling a parliamentary hearing that was “what’s driving us to try to make sure we stay on this narrow path.”
“I get a lot of letters, I read them, and some of them are very difficult to read,” he said Wednesday.
The governor said Australia was still on a narrow path to a “soft landing”, which involves the economy slowing enough to beat inflation while maintaining gains in the labor market.
Having a job was key to the health of household balance sheets, he explained, and to the ability to manage higher payments.
Reserve Bank Governor Michele Bullock (above) admitted she may be forced to raise rates.
The plight of distressed mortgage holders keeps the Reserve Bank focused on getting a soft landing and people into jobs.
And while the 40 per cent of the population exposed to interest rates as mortgage holders were “experiencing tough times”, Ms Bullock stressed that higher prices were hurting everyone.
“We don’t want to keep higher interest rates longer than necessary, but we need to make sure they are in place long enough to bring inflation back down,” he said.
Regarding the path of interest rates, Ms Bullock reaffirmed that the central bank was “not ruling out anything in or out” and would base its next decisions on incoming data.
“If it turns out, for example, that inflation starts to rise again, or is much more rigid than we thought and we cannot bring it down, then we will not hesitate to adjust rates again,” he said.
“On the contrary, if it turns out that the economy is much weaker than expected and that puts more downward pressure on inflation, then we will look for easing.”
Asked about the impact of the federal government’s energy bill rebates on the RBA’s fight against inflation, Ms Bullock agreed with Treasury estimates that the overall package would shave a quarter of a percentage point off general inflation.
Following the federal budget, the $300 energy rebate plan drew criticism from some economists who warned it would ease overall inflation but boost spending elsewhere.
Bullock said energy bill relief would reduce overall inflation “at the margin,” and could also help keep inflation expectations anchored, as well as influence prices of items indexed to the consumer price index.
“But in terms of the underlying pulse of inflation, we’re looking at it… we don’t think it’s going to have an impact on that,” he said.
“We try to look at things that are unique and are going to be reversed.”