It has been a bad couple of days for new RBA governor Michele Bullock.
First, she released a dreadful piece of research that juked every stat to make Treasurer Jim Chalmers look much more competent than he is.
Bullock’s supposition that renters have been better off in the past twelve months was such a feat of statistical contortion that she was yesterday challenged by the Senate Economics Legislation Committee to make sense of it.
While Bullock flopped around trying to explain her twisted logic, she was only saved when Assistant Governor Christopher Kent interjected to clarify that the renter’s income had risen more than inflation because they were working more hours.
This ended the debate but also exposed the bias of Bullock’s speech. How are renters better off if they have had to get a second job to pay the rent? (Using the HEM for renter’s costs was equally egregious).
The RBA has a long history of protecting the government of the day. But for a newly appointed governor, ascending only because the Treasurer sacked her boss, this looked more like payback propaganda.
Today, things get no better for Bullock as her duet with Treasurer Jim “Chicken” Chalmers is openly challenged:
Economists dispute Treasurer Jim Chalmers’ view that the stronger-than-expected consumer price index does not represent a “material” worsening in the outlook for inflation and urged the Albanese government to preserve the Reserve Bank’s independence.
Every component of Australia’s CPI topped forecasts in the September quarter survey released on Wednesday, prompting economists and money markets to increase their bets on an RBA cash rate increase to 4.35 per cent on Melbourne Cup Day.
“The Treasurer is on very dangerous ground with those comments,” said Warren Hogan, chief economics adviser at Judo Bank. “He is making a direct comment on monetary policy, which is completely inappropriate and brings into question the RBA’s independence.”
…“Domestic inflation is proving to be not just sticky, but there is evidence that it could be picking up in the last three or three to six months,” he said.
More importantly, it exceeded the RBA’s own projection of 0.9 per cent growth published in the August economic update. Annually, CPI cooled to 5.2 per cent, ahead of expectations of 5 per cent.
“I disagree with the Treasurer. It was a material change,” said Tapas Strickland, head of market economics at NAB, stressing that the annual trimmed mean measure came in five-tenths above the central bank’s prediction. NAB expects a rate increase next month and possibly another one thereafter.
In parliamentary testimony on Thursday, Ms Bullock said the inflation report came in “pretty much where we thought”. She noted the outcome was higher than the RBA’s August forecasts, but based on information since then, including the monthly CPI indicator, “we thought it was going to be about where it came out”.
It looked material to me. Worse, it was material thanks to Chicken Chamler’s policy blundering in energy and immigration.
Yet Bullock and Chalmers sang as if from the same hymn sheet.
In response, bond yields have offered a mixed picture. The short end of the curve has sold as the market prices more rate hikes. But the long end of the curve has not rallied much and has narrowed 15bs versus the US. This suggests the market is unconvinced of Bullock’s determination to kill inflation, perhaps out of some misbegotten relationship with Chicken Chalmers.
Michele Bullock needs to truncate that perception urgently.
