Australian news and politics recap: All the big news stories from February 21, 2025

Deputy Governor Sarah Hunter has offered a grim warning to China’s economic output, suggesting that the country is likely to hit its 5 per cent growth target but going forward would the demographic drag would have a greater and greater impact.

Ms Hunter said stimulus measures by the Chinese Government to adjust to slowing domestic growth would be expanded in the wake of US tariffs.

“Fiscal and monetary stimulus is not just in response to the domestic conditions. We also anticipate that they’ll provide further support as the impacts of the tariffs begin to flow through. So we should see a change in the composition of growth as well. Less export driven, more domestically driven,” she said.

“We do think that “China’s growth) is going to moderate down to four and a half percent, and probably keep going and tracking down into the back half of this decade. “That slowing in growth really reflects to a large part of their demographic transition. They have a shrinking working age population, and they’re near enough having a shrinking actual population as reflective of their demographic policies one child policy in particular, and that really then pulls down on the pace of absolute growth in your economy,” Ms Hunter said.

Ms Bullock said the Bank’s board was highly attuned to getting the timing wrong on interest rate cuts, saying that “arguably we were late raising interest rates on the way up, we didn’t respond as quickly as we should have to rising inflation.”

The Bank has been under fire from some commentators for cutting rates before inflation had fallen fully back to the target band of 2-3 per cent.

But Ms Bullock said the Board has been “quite cognisant” of the lag effect of rate movements.

“If we’re going to start reducing interest rates, then we need to be thinking of doing it not when we are already back in the band, but as we start to get more confidence we’re coming back to the band,” she said.

Independent MP Allegra Spender asked whether the lack of communication from the Bank since prior to Christmas had been confusing.

“Previously, the RBA has been criticised for not giving enough guidance. The question is, if (the rate decision) was such a line ball, should those expectations have been dampened down before Tuesday, given it was so close?” Ms Spender asked.

“I don’t think it was, but it was essential for us to get out and try to be clear about what the board’s thinking was and and why it had decided to move as it did, when it did, and what its prospects were for moving further. And the point there is simply, we’ve got to be data driven,” Ms Bullock replied.

Ms Bullock and her deputies have been in technical convesation about economic forecasting with Labor member Sam Rae about what their foreward estimates mean.

In the 65-page explanatory document that accompanied the Monetary Policy Statement on Tuesday, economists had noted that inflation was higher than the 2.5 per cent target that the Bank required.

Mr Rae raised the fact that the Bank uses market estimates for future rate cuts to calculate the impact on inflation in the future. Markets have predicted two to three further rate cuts for the remainder of the year, and the Bank Governors explained they needed the market “benchmark” to allow them build inflation models.

Deputy Governor Andrew Hauser said if the bank cut to the degree markets had forecast, the inflation target would not be met.

“We’re not saying that’s our preferred path, we’re saying that if it followed that path, we would not achieve our target,” Mr Hauser said.

Michele Bullock has rejected suggestions made by some economists that the rate cut was a “lay-down misere” and told the committee that it was the bank’s decision to bring in cameras to record the deliberations.

Some commentators had opined that the bank was always going to cut rates as a result of Government pressure, and the presence of cameras during the meeting was evidence that a decision was baked in.

“Who made the decision to bring the cameras into the board meeting on Tuesday?” asked Garth Hamilton, LNP MP from Queensland.

“We did,” Ms Bullock said.

“It was the last, final meeting of the Reserve Bank board. It was an historic occasion, and we felt that it was appropriate to mark that by just having some footage of the last ever meeting of the Reserve Bank board.”

Mr Hamilton asked: “Quite a few commentators took the view that the photos were, I guess, evidence of the rate cut being confirmed leading into it. But did you consider that as a risk, and how that might be perceived?”

“No, because we hadn’t made a decision,” Ms Bullock replied.

Asked who would be the most affected by rate cuts, Ms Bullock was at pains to point out the sector which had been most affected in the economy had been those on low incomes who were renting.

“They’ve seen a massive increase in rents, and they’ve also experienced massive inflation. So they’re not going to necessarily benefit from the decrease in interest rates. They are going to benefit as inflation starts to come down,” Ms Bullock said. “The group often gets forgotten, I think, and I just want to make sure that people understand. They are people that have really been hurt very hard.”

Ms Bullock said that the housing supply imbalance had been a core issue behind rent inflation and that it would take some time for the lag effect of interest rate cuts to flow through to new construction.

“We’re not going to suddenly see more homes being built tomorrow, because the cash rate was cut on Tuesday,” Ms Hunter added.

Asked by committee chair, Labor MP Daniel Mulino if “the Government’s Budget surpluses in the past two Budgets (have been) helpful in the fight against inflation,” Ms Bullock batted the chance to support Labor policy.

“Let me just step back for a minute and make the point right up front. Our task is to fight inflation, and we’re an independent central bank. The Government’s job is fiscal policy. It’s independent of us,” she said.

Reserve Bank governor Michele Bullock is facing the House of Representatives economics committee, to explain the bank’s thinking behind cutting interest rates this week.

Ms Bullock told the committee it would continue to closely watch labour data, which had been stronger than expected in the official figures that came days after the cut.

“Looking ahead, the board is committed to being guided by the incoming data and our evolving assessment of the risks. While the strong employment growth is good news for job seekers, we are alert to the possibility that is signalling a bit more strength in the economy, which could delay or derail the disinflation process,” Ms Bullock said.

In her address following the rate cut, Ms Bullock had told media that markets were too optimistic about further cuts this year.

She said the new RBA board “will look noticeably different” to previous one but was more active, spending two days rather then one on deliberations.

“The board has been closely involved in preparing the media release announcing its policy decision,” she said.

Subsidies, including childcare, have driving the decline in headline inflation and may have been reducing core inflation.

A “substantial” increase in housing inflation, including rents and construction had been noted by the RBA, declining faster than expected.

Services inflation has also been reducing further than expected in the December CPI.

“The December quarter figures were a bit of a downward surprise for us. Some of it we can explain away with subsidies. Others we can’t necessarily, and we think that does reflect a bit less inflationary pressure in the system, and that’s what’s giving the board, a bit more confidence, but not 100 per cent confidence that we are headed back to the band,” she said.

Deputy governor Sarah Hunter told the committee the board could not tell yet the inflationary impact of rising global tariffs, but did warn that as a small, open economy they would have an impact.

“Our broad assessment of any tariff based scenario is that Australia is exposed,” Ms Hunter said.

“We’re in the relatively speaking lucky position that we’re not as exposed as other countries,” she said.

“The bottom line, I think, is that it’s, it’s definitely negative for growth. The impact on inflation is less certain,” Ms Bullock said.

Prime Minister Benjamin Netanyahu has vowed revenge after Hamas turned the release of the bodies of four Israeli hostages, including the infant Kfir Bibas and his four-year-old brother Ariel, the youngest of those abducted during the October 7, 2023 attack into an horrific spectacle.

Palestinian militants handed over four black coffins in a carefully orchestrated public display overnight, with dozens of armed Hamas militants and crowds of Palestinians gathering to watch.

Rather than a respectful, private handover, as requested by the families, Hamas instead displayed the coffins on a stage with the backdrop a large image of Mr Netanyahu portrayed as Dracula above photos of the Bibas family.

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Reserve Bank of Australia Governor Michele Bullock will find herself in the firing line on Friday as she faces a parliamentary grilling following the board’s delivery of the first interest rate cut since 2020.

Ms Bullock said inflation had slowed more than expected, convincing the board it was appropriate to slightly ease monetary policy after its meeting on Tuesday.

But her caution to the market to lower its expectations for more cuts may raise the eyebrows of parliamentarians on Friday, some of whom have been calling on the bank to slash rates for months.

Ms Bullock is expected to shed more light on the RBA’s decision to hold rates over recent months and the decision to finally deliver rate relief to Australians this week.

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