EDITORIAL: Message muddled as inflation stand-off continues

Should the Reserve Bank’s most recent forecasts prove to be correct, inflation will not now return to a sustainable position within the bank’s target range of between 2 and 3 per cent until December 2026.

That would mean Australians would have been dealing with the effects of this inflation crisis for five years. Five years of paying more at the check-out for essentials. Five years of a punishing tightening cycle pushed onto mortgage holders. Five years of economic turbulence and uncertainty.

It’s a scenario that was predicted by former RBA governor Philip Lowe in November, who said at the time if it came to pass, Australians would be right to ask: “Are they serious?”

As a heart attack.

Our inflation problem is verging on the intractable.

And the messaging is bewildering.

In one moment, we have RBA governor Michele Bullock telling us that the economy is still too hot. Too many people want to buy too much stuff and that’s pushing prices up for everything. The only tool the RBA has to take the temperature down is by keeping rates where they are. Or, pushing them higher.

Flip the station and there’s Anthony Albanese or the State premier of your choice spruiking energy subsidies, tax cuts, or other cost-of-living busting measures, putting money into your pocket and shovelling fuel onto the inflationary fire.

Governments are determined to put back into the economy as much of the cash the RBA says it has no choice but to take out as possible.

Punters are left in the middle, dazed and suffering whiplash from the constant shifts in economic messaging.

It makes planning for the future near impossible for families who are desperate for some guidance on where things might be heading.

Ms Bullock did provide one kernel of that guidance, however. Don’t expect a rate cut — at least not in the “near term”.

What the “near term” means is a little fluffy. Forget about it this year.

And you probably shouldn’t hold your breath for one before the Federal election, due by May.

“The judgment of the board was that keeping the interest rate where it is, and making sure that people understand that a rate cut is not on the agenda in the near term, given what we know that continued pressure will help to keep demand coming back into line with supply,” Ms Bullock said.

In fact, the bank had strongly considered the prospect of a rate rise at this week’s meeting.

Ultimately, it decided that the pain that would bring mortgage holders wouldn’t be justified. Yet.

Treasurer Jim Chalmers took the opportunity to claim that the RBA’s decision to maintain the inflation stalemate was evidence that Labor’s economic plan was working.

As we enter yet another year of inflationary pain and with a Federal election looming, Australians will be asking: “Are they serious?”