The Reserve Bank’s new governor Michele Bullock has warned the Israel-Hamas war could push up petrol prices and fuel inflation – and joked there was someone even more hated than her former boss.
Even before the October 7 Hamas attack, Australian petrol prices had already surged by 14 per cent in a year as inflation worsened again.
With motorists already paying more than $2 a litre for E10 unleaded petrol, Ms Bullock said even higher petrol prices could push up inflation.
‘At the moment, we’re a little bit more worried about the potential inflation implications of this,’ she told an Association of Superannuation Funds of Australia forum on Wednesday.
Ms Bullock said consumers would expect inflation to remain high, and keep spending, following the shock of the Middle East conflict, on the back of the 2022 Russian invasion of Ukraine and the 2020 Covid pandemic.
‘Typically when we think about shocks to supply, the increased prices, you’d think, “Well, that’s probably okay. It will wash out”,’ she said.
The Reserve Bank’s new governor Michele Bullock has warned the Israel-Hamas war could push up petrol prices and fuel inflation – and joked there was someone even more hated than her former boss
‘But the problem is we’ve just got shock after shock after shock and the more that keeps inflation elevated, even if it’s from supply shocks, the more people adjust their thinking.
‘And the more people adjust their inflation expectations, the more entrenched inflation is likely to become.’
A drop in the jobless rate back to 3.6 per cent in September, down from 3.7 per cent in August, also adds to worry about wage pressures adding to inflation.
That’s because the RBA is expecting unemployment to rise to 4.5 per cent by the end of 2024 to get inflation back to target.
The Reserve Bank’s 12 rate rises in 13 months were the most aggressive since 1989, after Russia’s aggression following Covid lockdowns caused an inflation surge in early 2022.
But Ms Bullock suggested former Qantas chief executive Alan Joyce was even more hated than the RBA’s former governor Philip Lowe, who in 2021 suggested he would keep interest rates on hold at a record-low of 0.1 per cent until 2024 ‘at the earliest’.
‘One of the things about the independence of the Reserve Bank – and I’m sure Phil, I think he said this and he would concur with it, is that because we’re independent of the government, we can take difficult decisions,’ she said.
‘And yes, he did cop a lot and I think he got knocked off though by Alan Joyce.’
Ms Bullock, however, has signalled she is willing to also make unpopular decisions, following her seven-year appointment.
Her latest inflation warning was issued a day after the RBA’s October meeting minutes revealed board members would have ‘low tolerance for a slower return of inflation’ to its two to three per cent target ‘than currently expected’ by mid-2025.
Even before the October 7 Hamas attack, Australian petrol prices had already surged by 14 per cent in a year as inflation worsened again (pictured is rubble in the Gaza Strip at a refugee camp)
But Ms Bullock suggested former Qantas chief executive Alan Joyce was even more hated than the RBA’s former governor Philip Lowe (pictured in August), who in 2021 suggested he would keep interest rates on hold at a record-low of 0.1 per cent until 2024 ‘at the earliest’
The cash rate was this month left at an 11-year high of 4.1 per cent.
But a bad September quarter inflation reading, due out on October 25, could see the RBA raise rates again on Melbourne Cup Day, on November 7.
This would mark the 13th rate rise since May 2022, and would take the cash rate to a 12-year high of 4.35 per cent.
Inflation in August rose to 5.2 per cent, up from 4.9 in July, and marking the first monthly deterioration since April.
Source: | This article originally belongs to Dailymail.co.uk
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