Bullock says economy can’t be ‘tossed into the abyss’ to get inflation down

Speaking at a Committee for Economic Development of Australia event in Sydney this week, Michele Bullock said Australia cannot “completely toss the economy into the abyss” in the race to get into a position to cut interest rates.

The comments come after concerns several months ago that the central bank and the Albanese government were failing to work in tandem to battle persistent high inflation.

In the run up to next year’s general election, Ms Bullock pointed to concerns about the stagnant private sector.

“At the moment, the private sector is growing very slowly. Consumptions per capita is declining. It's true that government spending is helping to keep the economy at least on an even keel. If it wasn't filling that gap, then things might well be much worse in terms of the employment market.”

The Reserve Bank of Australia will continue to toe a firm line with its restrictive approach to fiscal policy, for now. Picture: Getty

Ms Bullock said she had confidence that inflation is coming back down to target, warning it was vital to keep fiscal policy tight to achieve the bank’s 2-3% target “without completely tipping the labor market off the edge”.

“In the face of these numerous global and domestic uncertainties, the RBA’s role and focus has not changed, and we are ready to meet these challenges head-on,” she added.

“Monetary policy settings will need to remain restrictive until the Reserve Bank board is confident that inflation is on track to return sustainably. If you let inflation get away and inflation expectations get away, it's very costly to get it down.

“We need to be alert that we don't let inflation expectations get out of control and alert, therefore, to upside risks.”