EDITORIAL: With a rate cut long odds, time for Jim to step up

Michele Bullock has said a resounding nup to a cut.

The Reserve Bank governor said the bank’s monetary policy board didn’t even consider one at their Melbourne Cup day meeting on Tuesday.

It’s no surprise. Inflation is on its way back up, with a sharp increase in the headline figure to 3.2 per cent over the year in the September quarter, outside the RBA’s target range of 2 to 3 per cent.

Trimmed mean inflation, which strips out more volatile factors, hit 3 per cent.

There was little the bank could do but hold the cash rate steady at 3.6 per cent.

Ms Bullock said the RBA was still working on the assumption that mortgage holders would get one more rate cut sometime next year., with underlying inflation remaining above 3 per cent until at least mid-2026 before eventually falling back to 2.7 per cent in 2027.

But she wanted to stress that nothing was assured.

“The bottom line, though, as we know, forecasts are very uncertain, and the further out you go, the more uncertain they are,” she said.

Ms Bullock described the current cash rate as being “pretty close to neutral”. That is, the level which isn’t expansionary or contractionary, but keeps the economy ticking along evenly.

“We may be a little restrictive, we may not. There may be a slight decrease (in rates), there may not,” she said.

“The board is going to be going meeting by meeting using data to inform that outlook and see whether or not that outlook still looks reasonable and if it isn’t, they will change their mind. We do not have a bias.”

It’s not the news homeowners wanted to hear.

There was some optimism in Ms Bullock’s message, in which she described those scary September quarter figures as a “blip” driven at least in part by temporary factors.

“We’re still confident inflation will come down and we have employment at a pretty good place,” she said.

Australians, worried about the impact of rising prices and now having to deal with the fact that another rate cut is no sure bet, should be forgiven if they don’t share that confidence.

The optimism which followed the post-election May rate cut appears to have all but evaporated.

Australians had hoped that move would put a full stop at the end of this period of economic difficulty. That hasn’t turned out to be the case.

That should mean the pressure is back on Treasurer Jim Chalmers to get his own policy settings right to help the RBA tamp down inflation and stop this “blip” become another full blown crisis.

Unfortunately, with the Coalition tearing itself apart on net zero, that pressure is absent within Parliament.

The Government’s focus on lifting Australia’s stagnant productivity has waned since its August economic roundtable.

Thankfully, Dr Chalmers has abandoned his plot to raid unrealised superannuation gains to prop up the budget. He must now turn his attention to delivering meaningful relief to Australians again feeling the strain.

Responsibility for the editorial comment is taken by Editor-in-Chief Christopher Dore.