Anthony Albanese has angrily rejected suggestions from the Reserve Bank that government spending is fuelling inflation.
The Prime Minister was on the defensive even before RBA Governor Michele Bullock suggested government spending was adding to inflationary pressures.
“We have produced two budget surpluses,” he told ABC News Breakfast host Lisa Millar on Thursday.
‘That’s two more than our predecessors produced after nearly a decade in office, when they promised a surplus in their first year and every year after.’
On Thursday night, Ms. Bullock reiterated her concern that government spending increases inflationary pressures.
“On fiscal policy, governments have a job to do and I have a job to do,” he told the Rotary Club of Armidale in northern New South Wales, where he grew up.
‘My job and the job of the Reserve Bank is to reduce inflation.
‘Governments have a different job: their job is also to reduce inflation, and they recognise that, but it is also to provide services and infrastructure for the Australian people.
Anthony Albanese has angrily rejected suggestions from the Reserve Bank that government spending is fuelling inflation
“They have to do all of that while focusing on keeping inflation low.”
Ms Bullock was back on the record on budget policy two months after the Reserve Bank issued a warning on government spending.
“The recent budget results may also have an impact on demand, although federal and state energy rebates will temporarily reduce headline inflation,” he said in a statement from the June meeting.
The federal government’s May budget offered $300 electricity rebates in four $75 installments.
But energy credits, which are not means-tested, will run out by the end of June next year, pushing energy prices up 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 credited to customers’ bills during this 2024-25 financial year.
Queensland Treasurer Jim Chalmers on Wednesday rejected a suggestion that electricity discounts would only provide temporary relief before power prices soared again.
“Absolutely not. What I mean is that firstly there is nothing artificial about helping people cope with the pressures of the cost of living,” he told ABC Radio National host Patricia Karvelas.
The Prime Minister was on the defensive even before RBA Governor Michele Bullock reiterated her concerns about Labor’s federal and state government spending keeping inflation high.
The Reserve Bank this week left interest rates unchanged at 4.35 per cent on 12-year bonds, but Ms Bullock repeated her assertion on Thursday night that there will be no rate cuts before February next year.
“We don’t see interest rates coming down quickly,” he said.
“It’s just that right now, given inflation and employment continuing to grow quite well, we just can’t see what will allow us to lower interest rates.”
Ms Bullock also noted that Australia’s cash rate was lower than equivalent policy rates in the United States, the United Kingdom, New Zealand and Canada.
“Remember, we don’t get as far as others,” he said.
“We could say that we are a little less restrictive than the rest, so we have to be a little more careful.”
The Reserve Bank updated its forecasts this week, predicting headline inflation will remain high at 3.7 percent by December 2025.
The consumer price index was not expected to fall within the RBA’s 2 to 3 percent target range until December 2026.
Ms Bullock said it would take a severe global financial shock for the Reserve Bank to provide early relief in 2024 to mortgage holders, who have suffered the most aggressive rate rises since the late 1980s.
“Is there anything that will change my mind? No, there is nothing,” he said.
‘Unemployment would be one, inflation would be another, a dramatic change in circumstances abroad that would really affect our trade, for example.’