EDITORIAL: Labor distracted by own failings as inflation bites

Editorial
The Nightly
3 Min Read
Reserve Bank Governor Michele Bullock speaks to the media during a press conference in Sydney, Tuesday, May 7, 2024. (AAP Image/Bianca De Marchi) NO ARCHIVING
Reserve Bank Governor Michele Bullock speaks to the media during a press conference in Sydney, Tuesday, May 7, 2024. (AAP Image/Bianca De Marchi) NO ARCHIVING Credit: BIANCA DE MARCHI/AAPIMAGE

If we don’t get a handle on inflation soon, the Reserve Bank will put up rates again.

That is the truth of it. They won’t enjoy it, but they’ll do it.

Just one more unfavourable CPI report could be enough for RBA governor Michele Bullock to pull the trigger.

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That would be a disaster for many households, the savings reserves of which have been drained by this brutal two-year tightening cycle.

But the RBA will do it all the same because it’s the only mechanism it possesses in the inflation fight. And to do nothing would be to compound the problem by inviting inflation to become further entrenched.

Painful as it was, that tightening cycle worked, easing consumer price growth has eased substantially from its peak of 8.4 per cent in late 2022 to 3.4 per cent in December. But, as Wednesday’s figures from the Australian Bureau of Statistics showed, it’s on the march again.

That headline inflation figure of 3.6 per cent for the year to April was enough to further spook the already nervy markets. And while most economists are now predicting interest rates will stay steady until the end of 2025, an increasing number are warning that a hike could be possible as early as September.

RBA chief economist Sarah Hunter confirmed they were keeping a close eye on inflation ahead of June’s meeting, saying the board was “absolutely focused on the fact that inflation is clearly still above the target band”.

“Clearly there’s still some strength in inflation and that’s a key consideration for the board in their decision-making,” Dr Hunter told an investment conference in Sydney on Thursday. “It’s one of the many indicators that they’re tracking.”

And while an increase in the cash rate would be terrible news for homeowners, it would also be a fiasco for the Government as a 2025 election looms.

Cost of living is the No. 1 concern of Australians who have been squeezed relentlessly. They will not hesitate to punish a Government they perceive to have made their trials worse.

But if the Government is aware of the depth of feeling, you wouldn’t know it to tune into Parliament this week.

Instead of focusing on what can be done to help struggling families and tame inflation, our politicians’ attentions this week have been captured by a debate as to whether or not an inept Immigration Minister should keep his job after yet another bungle.

That’s a crisis entirely of the Government’s own making.

And while it’s imperative that the Government sort out its immigration omnishambles for the sake of community safety, it’s an unnecessary distraction away from what should be its top priority.

Wednesday’s bump in inflation came before billions in State and Federal government stimulus starts flowing to households.

From July, the stage three tax cuts will also see taxpayers hold on to more of their money.

Economists have warned that both of these things could stimulate a further increase to inflation.

If that happens, the Government won’t be able to continue looking away.

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RBA boss turns hopes of mortgage cut on its head, declaring the bank is now only considering LIFTING rates as inflation continues to punish households.