Aussie macro management is melting down:
Treasurer Jim Chalmers has disputed the Reserve Bank of Australia’s assessment that the economy was still too strong and that big-spending government budgets were prolonging inflation.
Reserve Bank of Australia governor Michele Bullock on Tuesday said the board gave serious consideration to raising the cash rate to 4.6 per cent from 4.35 per cent due to ongoing concerns about “the degree of excess demand in the economy”.
RBA chief economist Sarah Hunter on Wednesday morning said the economy was “running a bit hot”.
But Dr Chalmers disagreed with the RBA’s assessment on Wednesday morning.
“I think it’s hard to sustain an argument that the economy is running too hot, or that people have too much spare cash given all of the data and all of the feedback that we get, which shows that’s not the case,” Dr Chalmers told ABC radio.
How bizarre. This is all politics and no sense.
Public demand is very high.
But private demand is in a full-blown recession.
We see this in jobs demand, in which private hiring has collapsed while public is ridiculously high:
The net result is a per capita recession that is winning in terms of falling inflation but not as fast as the RBA would like.
This gulf is widened further by the Albanese government’s insane energy shock:
This has producer inflation bouncing while the Treasurer deploys energy rebates to cover the inflation, which the RBA does NOT accept as genuine disinflation, rather stupidly given the rebates will not stop:
“Budget spending is not the primary determinant of prices in the economy, but we can be helpful, and we are being helpful, with the design of our cost of living policies, which help us get back to [the 2 to 3 per cent inflation] target sooner,” he told ABC radio.
However, Hunter said state and federal government subsidies were not helping to get inflation back to the RBA’s 2 to 3 per cent target on a sustained basis, since the policies were temporary.
“So what the board are considering and trying to achieve is inflation sustainably back at the target,” Hunter told the Senate cost of living committee in Sydney.
The Treasurer and the RBA are now at war instead of working in tandem.
This is mostly the fault of Treasurer Jim “Chicken” Chamlers, with some RBA puritanism thrown in.
The result is suffering for households, again, as yields dislocate higher than they should be and markets wonder the hell is going on.
