God save me from the eggheds of the RBA.
RBA governor Michele Bullock, in her opening statement addressing a press conference, says the central bank may have misjudged “the gap” between supply and demand in the economy.
“Overall, when we take into account a broad range of indicators, we judge that the labour market is still a little bit tight relative to full employment,” she said.
“This highlights an important judgment in our forecasts. We still think there’s a bit of excess demand in the economy. This may be what is manifested in the inflation data. Nevertheless, we are alert to the risk that we have misjudged the gap between demand and supply in the economy in either direction.”
The only thing the RBA has misunderstood is a shortage of gas delivered by idle Albo.
Because his party is obsessed with your genitals, and the opposition is in tatters, there is nobody to hold the gas cartel to account.
The gas cartel combined gas and electricity price shock has delivered 3% of post-COVID inflation and some significant further percentage when spillovers are counted.
Moreover, year-to-date hikes in power prices are a spectacular 37% after Chicken Chalmers’s energy rebates rolled off. This is a materially larger and swifter shock than the Ukraine War itself.
The notion that we have excess demand or limited supply in this scenario is outright stupid.
Consumption expenditure is being artificially boosted by the bill shock while household spending volumes fall.
Supply is constrained by price shocks like those in building materials, which are idling capacity because nobody can afford to pay for them.
This is supply-push inflation, not wage-push inflation.
What should the RBA be doing in that scenario?
First, it should pile public pressure on the government to fix the real problem by regulating the gas cartel. Yeh, nah. The Bullock central bank is the most timid with government that I can remember.
Second, central banks typically “look through” supply-push inflation episodes because they are temporary and, as said, are already damaging demand. By tightening policy, they risk intensifying the demand downturn to no good effect.
The RBA is not talking about hiking interest rates, at least, but it is tightening policy by adjusting the outlook for policy to neutral from dovish.
And by blaming labour modest and falling wage growth, of which Australia has an endless supply in India, the RBA is risking post-COVID gains in the labour market that it says it wants to protect.
Unemployment is already rising and has further to go, even more so now.
That is, once again, the RBA is “making room” for Albo’s gas cartel on your dime when it has no need to do so.
