I can’t recall a worse start for a new Reserve Bank governor. Captain Michele Bullock’s credibility is on fire within a week.
First, she unwisely began her tenure with a deeply biased (that is, corrupt) speech that twisted reality to defend the Albanese Government’s rental apocalypse.
Second, Bullock’s appearance in parliament was so conformist with Treasurer Jim Chalmers that everybody now wonders if she is in his pocket.
John Kehoe:
The conundrum for the RBA is that it knows real household disposable income is already squeezed by inflation, income tax bracket creep, and interest rate rises. Consequently, per capita spending is going backwards.
But strong migration and population growth is still driving aggregate consumer demand across the economy and putting upward pressure on inflation.
…Chalmers insisted that the inflation report was not a “material” change for Treasury’s budget forecasts.
…Bullock would need to craft a credible story for keeping rates on hold and not appearing to bend to the political winds in Canberra.
Chris Joye is characteristically more blunt:
Following the material upside surprise to inflation in the September quarter, almost all economists and investors agree that the Reserve Bank of Australia should lift interest rates in November.
But participants worry that a concerted campaign to politically compromise Australia’s central bank may result in the RBA remarkably choosing not to seek to combat its existential inflation crisis.
Columnist Terry McCrann claims that Kennedy “all-but announced he will be voting for a pause”. McCrann also points out that Chalmers has yet to appoint a deputy governor of the RBA, depriving Bullock of one supporting vote, and that the two new board members appointed by Chalmers “do not look like rate hawks to me”.
And then there is the fact that Chalmers has still not executed the RBA’s agreement with the government regarding the conduct of monetary policy.
It is pretty unseemly stuff for a central bank that has had its credibility trashed in recent times.
In sum, we know the RBA should hike in November. Whether it actually does or not appears to now be a question of its ability to resist political interference.
The sisterhood tries to blame Chicken Chamlers. Karen Maley:
It’s extremely convenient for Jim Chalmers that Australia’s central bank is in a vulnerable position because it means that Reserve Bank governor Michele Bullock will be reluctant to call him out.
…Bullock, however, will be aware that it’s not a good time to be picking a fight with the Treasurer by drawing attention to the fact that government policies are playing a major role in driving inflation.
After all, she’s only been in the top job for a little over a month. And, perhaps more importantly, she’ll be extremely conscious that the RBA is very vulnerable at present, given Chalmers has yet to appoint a new deputy governor to the central bank.
Rubbish. The one thing that the RBA has always done is let the data rule its decisions, whether it had been right, wrong or sideways in the lead-up.
If Captain Bullock breaks that essential reaction function, then she is responsible, not Chicken Chamlers.
And Bullock shouldn’t be fooled by any sugarcoating. If the RBA cocks this up, she will be blamed, not Chalmers. Pollies are assumed to be corrupt. Governors of the RBA are assumed to be a clean pair of hands.
Ironically, the inept Chalmers has gamed Michele Bullock into a corner where she either hikes rates or her credibility collapses.
