Reserve Bank of Australia deputy governor Andrew Hauser says ‘toxic’ high inflation must be pushed lower

Adrian Lowe
The Nightly
3 Min Read
New Reserve BAnk of Australia deputy governor Andrew Hauser.
New Reserve BAnk of Australia deputy governor Andrew Hauser. Credit: Supplied/Supplied

New Reserve Bank of Australia deputy governor Andrew Hauser says it’s vital for central banks to move quickly and firmly to push inflation lower — because high inflation at its worst has caused genuine breakdown in society, including war.

Mr Hauser has also reinforced that the RBA’s job is to solely focus on fighting inflation by pushing it back to target, rather than a certain point for interest rates to be at.

“Our target is not a particular level of interest rates. It’s a particular level of inflation,” he said.

Sign up to The Nightly's newsletters.

Get the first look at the digital newspaper, curated daily stories and breaking headlines delivered to your inbox.

Email Us
By continuing you agree to our Terms and Privacy Policy.

Speaking on Friday in his first public comments since taking his position in February, the former Bank of England official also agreed it was dangerous for central bankers to make predictions about the future course of interest rates.

Mr Hauser said the way high inflation infiltrated into everyday life and every decision people made was “incredibly toxic” and something everyday people could not control.

“Without wishing to be hyperbolic, it’s caused wars. It’s caused genuine breakdown in society, because it is the most unfair form of economic development,” he said at the Australia’s Economic Outlook event hosted by Sky News.

“If you’re on low incomes, if you’re on fixed incomes and you’re struggling to make ends meet, inflation is a toxic thing. You can’t do anything about it.

“So it’s that that I think we need to give people reassurance about, not that their interest rate will be at X, Y or Z.”

Echoing previous comments of RBA governor Michele Bullock, Mr Hauser also said given inflation had now been above the RBA’s 2 to 3 per cent target for years, it was important to ensure people believed the central bank was serious about bringing it back to that level.

Otherwise, he said, people’s expectations inflation would rise and became built into wages or prices “and it becomes very, very difficult to get rid of from there”.

Mr Hauser emphasised that Australia was not at that level, and inflation expectations were still “well-anchored” but his comments suggest the RBA remains wary of the potential for people’s thinking to shift.

“I know this is a difficult thing to sell, but the most important communication we can give to . . . the Australian people . . . is that we can and will get inflation back to a stable and low level,” he said.

To combat the highest level of inflation since the early 1990s — it peaked in late 2022 at 7.8 per cent — the RBA embarked on the toughest tightening of interest rates in a generation, going from 0.1 per cent in May 2022 to 4.35 per cent in November last year, where they have stayed since.

Some economists think the bank may be able to start cutting rates later this year but others believe it will be early next year.

In recent days, the European Central Bank and the Bank of Canada have both cut interest rates. Mr Hauser said all central banks were combating a similar problem of sticky inflation but he believed the ECB and BoC had been “keen . . . to start the rate-cutting cycle to show they they’re independent of the US”.

The US Federal Reserve is also expected to cut rates later this year but economic advisory groups such as the International Monetary Fund have urged central banks to strike their own course on rate cuts and not simply follow the lead of the Fed.

Mr Hauser, referencing repeated revisions to forecasts in the US about future interest rate moves, warned against “actually putting too much weight on these very knowledgeable forecasts at any moment in time”.

Latest Edition

The front page of The Nightly for 14-06-2024

Latest Edition

Edition Edition 14 June 202414 June 2024

Tesla investors deliver Elon Musk an 11-cylinder salary.