Bullock Says Global Economy On “Knife Edge”

RBA’s Deputy Governor Bullock has taken questions after her BPP talk to Bloomberg.

• She doesn’t believe that Australian rates are restrictive yet. She said that the board is now looking at opportunities to slow the pace of tightening. She repeated with emphasis that the bank is NOT on a pre-set path.
• Bullock noted that Australia is different from the US and UK because inflation is not as high and that wages haven’t responded in the same way. Currently, Australia has less momentum in “inflation psychology” but it has shifted, and the RBA wants to ensure by tightening that it doesn’t go further.
• She noted that the global outlook is very uncertain and on a “knife edge”.
  • Her main concerns in China were the impact of its Zero Covid policy on supply-chains and demand, and the property market and its effect on Australia through steel and therefore iron ore demand.
  • She is also worried about the US as it hikes to reduce excess demand and thus risks a recession, and the impact of the European energy crisis on production.
• In terms of quantitative tightening, she confirmed that the board had decided not to rundown the portfolio but that it hasn’t categorically ruled it out. At the moment though, the RBA won’t be selling before maturity.
• Press conferences are currently under review, but Bullock wasn’t in favour of monthly press meetings and was happy with the status quo.
• The RBA will only be analysing the usefulness of the new monthly CPI series for now.