‘Why we’re fighting inflation’: RBA boss Michele Bullock hits back amid Jim Chalmers battle

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‘Why we’re fighting inflation’: RBA boss Michele Bullock hits back amid Jim Chalmers battle

Governor Michele Bullock has defended the Reserve Bank’s 13 interest rate hikes to ****** inflation, arguing Australia’s most vulnerable have been hit hardest by surging prices.

The national economy grew just 0.2 per cent in the June quarter as businesses and households cut back their spending, in a sign higher borrowing costs are biting.

That came just days after Treasurer Jim Chalmers accused the central bank of “smashing the economy” with rate hikes.

But Ms Bullock hit back against critics on Thursday morning.

“High inflation hurts everyone, and especially the most vulnerable,” she told an Anika Foundation lunch in Sydney.

“Younger households and lower income households have been particularly affected by cost-of-living pressures.”

That’s because those Australians have smaller savings buffers and less scope to switch to cheaper items — because they are usually already buying the lowest cost products in a category.

They also tend to spend a much larger share of their income on rents, which have rocketed as much as 40 per cent over just four years.

Ms Bullock warned that lower income households would be hurt further if the battle against inflation takes longer than expected.

Higher-for-longer interest rates would be needed to slow the economy even more, risking a recession and greater job losses — likely to hit more vulnerable households the worst.

But Ms Bullock acknowledged borrowers were squeezed hard by higher rates and the aggressive campaign to ****** inflation was affecting those with mortgages.

About one in 20 owner-occupiers with a variable rate mortgage had a cash shortfall — meaning spending on essentials and mortgages was higher than their income.

“We know the restrictive monetary policy settings that are necessary to bring inflation down are causing hardship to some households and businesses,” she said.

“We are very conscious of that . . . but inflation causes hardship too.”

The RBA has been fighting to slow demand and get the economy back into balance after prices rocketed when a wave of stimulus hit global economies coming out of the COVID-19 pandemic.

The central bank targets inflation of 2 to 3 per cent — yet the underlying rate was 3.9 per cent in June.

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