Speaking at an event in Hong Kong yesterday, Michele Bullock expressed her surprise at how strongly the economy has reacted to the 13 hikes in the cash rate, reports the Australian Financial Review.
“Despite that noise, households and businesses in Australia are actually in a pretty good position. Their balance sheets are pretty good.”
Bullock said households and businesses are in “good position”, despite many enduring a cost of living crisis. But she also warned it was “very uncertain” inflation will return to target in the next two years.
“We’ve been surprised a little bit on the strength of activity. It’s held up a little better than we thought. That’s meant that services price inflation has held up a bit more.
“So what we’re observing is a bit more domestic price pressures than we’d expected.”
Among the other speakers at the event was Bullock’s predecessor Philip Lowe who issued an ominous warning in his first public comments since departing as RBA governor in September.
He told the audience he was worried central banks may not have increased interest rates high enough.
Lowe also warned the RBA will suffer a blow to its standing if it failed to reach its inflation target by 2025.
Bullock’s speech before a gathering of high-powered bankers came ahead of next Tuesday’s final RBA board meeting.
This week the Federal Government will introduce legislation to overhaul the (RBA) in its biggest shake-up since the central bank’s foundation.