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RBA: RBA Focus On “Sustainable” Return Of Inflation To Band

RBA
Central Bank NewsForeign Exchange BulletsAPACAustraliaBulletGlobalFixed Income BulletsRBARegionMarkets

RBA Governor Bullock appeared before the Senate Economics Committee today and reiterated that inflation needs to return “sustainably” to target and that is its focus. She also noted that both survey and market measures of medium-term inflation expectations are around 2.5%, the mid-point of the band.

  • The RBA focuses on headline inflation but as its return to the band will not be sustained due to the temporary nature of federal and state government rebates. Thus it is focusing on trimmed mean to gauge the underlying inflation trends which is expected to drive where headline is going once the subsidies expire.
  • Q4 2024 headline CPI is expected also to be impacted by electricity rebates. The RBA estimated that two-thirds of the 1pp drop in Q3 inflation was due to the government subsidies (0.45pp) and the fall in petrol prices (0.25pp).
  • There were questions on the impact of a Trump presidency. The RBA will wait until policies are passed and not just part of an election campaign before estimating their effect on the Australian economy.
  • If universal tariffs are at 10% and US government spending increases as planned, then the impact on Australia is likely to be minimal. Tariffs directed at China and China’s response are the key events that are likely to affect the Australian economy through commodities.
  • Bullock said in response to questions on Australian fiscal policy that she believes that the government’s “attitude” to spending is the “right one”.
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RBA Governor Bullock appeared before the Senate Economics Committee today and reiterated that inflation needs to return “sustainably” to target and that is its focus. She also noted that both survey and market measures of medium-term inflation expectations are around 2.5%, the mid-point of the band.

  • The RBA focuses on headline inflation but as its return to the band will not be sustained due to the temporary nature of federal and state government rebates. Thus it is focusing on trimmed mean to gauge the underlying inflation trends which is expected to drive where headline is going once the subsidies expire.
  • Q4 2024 headline CPI is expected also to be impacted by electricity rebates. The RBA estimated that two-thirds of the 1pp drop in Q3 inflation was due to the government subsidies (0.45pp) and the fall in petrol prices (0.25pp).
  • There were questions on the impact of a Trump presidency. The RBA will wait until policies are passed and not just part of an election campaign before estimating their effect on the Australian economy.
  • If universal tariffs are at 10% and US government spending increases as planned, then the impact on Australia is likely to be minimal. Tariffs directed at China and China’s response are the key events that are likely to affect the Australian economy through commodities.
  • Bullock said in response to questions on Australian fiscal policy that she believes that the government’s “attitude” to spending is the “right one”.