{"id":101670,"date":"2025-02-24T08:30:00","date_gmt":"2025-02-23T21:30:00","guid":{"rendered":"https:\/\/en.econostrum.info\/au\/?p=101670"},"modified":"2025-02-24T01:21:50","modified_gmt":"2025-02-23T14:21:50","slug":"rba-high-prices-despite-cooling-inflation","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/au\/rba-high-prices-despite-cooling-inflation\/","title":{"rendered":"RBA Governor Michele Bullock Warns: High Prices Are Here to Stay Despite Cooling Inflation"},"content":{"rendered":"\n

The Reserve Bank of Australia<\/strong> (RBA<\/strong>) governor, Michele Bullock<\/strong>, has confirmed that while inflation<\/strong> is easing, Australians should not expect prices<\/strong> to return to previous levels.<\/p>\n\n\n\n

The Nightly<\/a><\/strong> reports that, speaking before a parliamentary committee, Bullock acknowledged the ongoing financial pressure on households but indicated that real wage growth may offer some relief over time.<\/p>\n\n\n\n

Inflation Cooling but Price Levels Remain High<\/h2>\n\n\n\n

Bullock explained that although inflation is slowing, the overall cost of living remains significantly elevated. Since the start of the COVID-19 pandemic<\/strong>, prices have risen by approximately 18%<\/strong>, and she made it clear that these increases are unlikely to reverse.<\/p>\n\n\n\n

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\u201cThe unfortunate news is that the price level doesn\u2019t go back,\u201d Bullock stated. \u201cWe can get inflation down to stop it increasing quite so quickly in the future, but the price level isn\u2019t going back to where people remember it being a few years ago.\u201d<\/p>\n<\/blockquote>\n\n\n\n

This means that while future price increases may moderate, Australians will need to adjust to a higher baseline cost of living<\/strong>.<\/p>\n\n\n\n

Interest Rate Cut Follows Delayed Response to Inflation<\/h2>\n\n\n\n

The RBA<\/strong><\/a> recently lowered the cash rate by 0.25 percentage points to 4.1%<\/strong>, marking the first rate cut since November 2020<\/strong>. This move comes after a series of 13 consecutive rate hikes<\/strong> aimed at controlling inflation.<\/p>\n\n\n\n

Bullock acknowledged that the RBA had been slower than other central banks in raising rates<\/strong>, which contributed to prolonged inflationary pressures. She noted that this week’s rate cut was partially motivated by a desire to avoid another delayed response<\/strong>.<\/p>\n\n\n\n

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\u201cArguably, we were late raising interest rates on the way up; we didn\u2019t respond as quickly as we should have to rising inflation,\u201d she told the committee.<\/p>\n<\/blockquote>\n\n\n\n

The RBA\u2019s current approach seeks to balance inflation control with economic stability<\/strong>, ensuring that monetary policy does not overly strain households and businesses.<\/p>\n\n\n\n

Future Rate Decisions Remain Uncertain<\/h2>\n\n\n\n

While many economists predict up to three further rate cuts in 2025, Bullock cautioned that the RBA will remain data-driven and cautious. She stressed that decisions on future cuts will depend on evolving economic conditions, including job market resilience and global trade uncertainties.<\/p>\n\n\n\n

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\u201cThe board is committed to being guided by the incoming data and our evolving assessment of the risks,\u201d she said.<\/p>\n<\/blockquote>\n\n\n\n

One of the external risks<\/strong> identified by Bullock is Donald Trump\u2019s proposed trade tariffs<\/strong>, which could have uncertain inflationary effects<\/strong> on Australia. She explained that the impact could unfold in different ways. <\/p>\n\n\n\n

If China responds by exporting goods more cheaply elsewhere, including to Australia, this could help lower prices and have a disinflationary<\/strong> effect. <\/p>\n\n\n\n

However, if the US dollar strengthens due to increased import duties, this would make imports more expensive for Australians, adding to inflationary pressures<\/strong>.<\/p>\n\n\n\n

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\u201cThe first point to make is that it is not only uncertain, it\u2019s unpredictable,\u201d Bullock said, referring to US trade policies. \u201cWhat\u2019s policy one day is not policy the next day.\u201d<\/p>\n<\/blockquote>\n\n\n\n

Real Wages and Economic Confidence Key to Household Relief<\/h2>\n\n\n\n

Despite concerns about sustained high prices<\/strong>, Bullock expressed optimism that as real wages<\/strong>\u2014wages adjusted for inflation\u2014begin to rise, Australians will start to feel some financial relief.<\/p>\n\n\n\n

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\u201cI don\u2019t expect it will start feeling better immediately, but I think if we can keep inflation back down in the target band and real wages are rising, people will start to feel a bit better over the coming year,\u201d she said.<\/p>\n<\/blockquote>\n\n\n\n

The RBA\u2019s target inflation range of 2% to 3%<\/strong> is now within reach, with core inflation slowing to 3.2% in December 2024<\/strong>, its lowest level since 2021.<\/p>\n\n\n\n

The Future of Cash in Australia<\/h2>\n\n\n\n

Beyond inflation and interest rates, Bullock also addressed the declining use of cash<\/strong>, predicting that physical currency may only remain widely used for another ten years<\/strong>. <\/p>\n\n\n\n

However, she recognised challenges in cash distribution and reaffirmed the RBA\u2019s commitment to ensuring that Australians can continue accessing and using cash as long as needed.<\/p>\n\n\n\n

She noted that cash remains an important store of wealth, particularly during periods of economic uncertainty, and serves as a useful backup for electronic payment systems.<\/p>\n","protected":false},"excerpt":{"rendered":"

RBA governor Michele Bullock cautions that while inflation is easing, prices won\u2019t return to past levels. With interest rate cuts and global uncertainties ahead, what\u2019s next for Australia\u2019s economy?<\/p>\n","protected":false},"author":9,"featured_media":101671,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-101670","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/posts\/101670","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/comments?post=101670"}],"version-history":[{"count":1,"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/posts\/101670\/revisions"}],"predecessor-version":[{"id":101672,"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/posts\/101670\/revisions\/101672"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/media\/101671"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/media?parent=101670"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/categories?post=101670"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/au\/wp-json\/wp\/v2\/tags?post=101670"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}