The Reserve Bank governor's prediction that she would hold interest rates for six months was the unlikely trigger for a political war over her institution.
Before she set off the chain of events that would reduce the Reserve Bank reforms to a smoking wreckage, Governor Michele Bullock gave a nervous laugh.
Then, Treasurer Jim Chalmers got involved — tentatively and maybe accidentally, but enough to trigger headlines about a "war" with Bullock that he did little to defuse. When describing the economy, he would always mention the plight of households with mortgages, who were being "pinched", "squeezed" and/or "hammered".
It is a "narrow path" with little margin for error and many sceptics, but the aim is to preserve employment and avoid the scarring of a deep recession. What she actually said was that the pain of persistent inflation was even worse for society's most vulnerable, reinforcing her decision to hold her nerve until inflation was definitively under control before cutting rates.It is not clear whether Jim Chalmers had lost his when he said interest rates were "smashing" households instead of "hammering" them, or whether he was just riffing.
That approach could share the inflation-fighting pain around, a legitimate use for fiscal policy. But the political risks are obvious and the government has given no indication it has the appetite to bite them off. Any sugar hit from "bank bashing" will be weighed against the risk of cementing a perception the government could have fixed this whole mess by now if it wanted to.The "rift" with the governor may also cost the treasurer his Reserve Bank bill.
Federal Government Reserve Bank Of Australia Reserve Bank Interest Rates Inflation Jim Chalmers Michele Bullock Phil Lowe Angus Taylor
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