The Reserve Bank Governor Michele Bullock has used a speech at a charity lunch to say it's premature to be thinking about interest rate cuts. Her remarks come a day after the ABS published data showing economic growth to be at its slowest pace since the 1990s recession.
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00:00About a third of Australians have a mortgage, which is subject to interest rates. About
00:05a third of them rent. Many of those properties also subject to interest rates. And about
00:09a third have paid off their housing. Now for those people who tend to be older, they have
00:14built up assets. And what's happened with interest rates is it doesn't just affect housing,
00:19it also affects assets. So those people who have paid off their housing and don't have
00:23their housing cost, they're seeing their asset values rise, shares, superannuation returning
00:29almost double digits, and bank deposits getting more money back. So what you're seeing is
00:34a real split almost generationally in our society about the impact of interest rates.
00:41They're affecting most substantially people who have mortgages, people who are in the
00:45kind of middle years of 30 to 50, they have large mortgages, they have family commitments.
00:51These are the people that are being squeezed the most. But Michelle Bullock is absolutely
00:55laser focused that they will get inflation down, that inflation is a bigger problem
01:00because it is a problem for everyone, and that they're using the one tool that they
01:04have at their disposal being interest rates. So they're going to stay at the level they
01:09are basically dismissed out of hand any suggestion there are any imminent changes to interest
01:15rates on the horizon that will be maintained.
01:19So the board's message following its meeting only a few weeks ago was that it's premature
01:25to be thinking about rate cuts. Circumstances may of course change, and if economic conditions
01:31don't evolve as expected, the board will respond accordingly. But if the economy evolves broadly
01:36as anticipated, the board does not expect it will be in a position to cut rates in the
01:41near term.
01:43So we had GDP figures that basically showed the economy stuttering along 1% of growth
01:47annualised for the past year. That's a level we haven't seen since the kind of recession
01:52we had to have back in the 90s. But that's not an excuse according to Michelle Bullock
01:57to change the interest rate settings. It shows it's working. The speech was about the evils
02:03of high inflation and evil is a word that the former governor, Philip Lowe, used a bit
02:09when talking about inflation. Even to the very last line of this speech, Michelle Bullock
02:13was so focused on inflation, basically saying she's happy to wear higher unemployment, even
02:19though that has a substantial effect on the people who will lose their jobs, to get inflation
02:24down. Inflation is what the Reserve Bank is focused on and like the Terminator, they will
02:29just keep going until it gets down, essentially no matter the cost.