By Shane Wright
The Michele Bullock era tour has begun.
And it started with the Reserve Bank giving her as much room to move as possible while producing one bum note.
Since its creation, the RBA has been something akin to a bunch of mystics, sitting atop a cloud-enveloped mountain, who would occasionally deign to talk to the mortals with their mortgages or business loans.
RBA governor Michele Bullock says Taylor Swift’s Eras tour won’t add to inflation - as long as concertgoers are willing to give up spending elsewhere.Credit: Louise Kennerley, Getty
Now, under the biggest revamp to the bank since the 1980s, Bullock gave a press conference – her first – just after the RBA’s first two-day meeting. She spoke after the release of a statement, announcing the decision to keep the cash rate on hold, issued on behalf of the entire board rather than under the governor’s name.
In central banking terms, the changes are up there with Bob Dylan going electric in 1965.
The press conference, used by other central banks, gave Bullock the chance to paint the RBA as an understanding institution that is doing its best to bring inflation down while ensuring people hold on to their jobs.
Financial markets reckon the Reserve will have to start cutting interest rates through the second half of the year. The RBA’s economic assumptions are underpinned by that expectation.
But the statement issued by the board contained the line that while inflation is easing, a “further increase in interest rates cannot be ruled out”.
According to Bullock, that single line might have caught our attention but it is all part of the bank leaving its options open.
“We’re not ruling in or out anything,” she said.
Bullock’s predecessor was attacked mercilessly for his declaration that the bank did not think interest rates would be moved from 0.1 per cent until around 2024. The bank had also got its prognostications on interest rates movements incorrect in 2018 when it thought rates would have to go up (before they fell to record lows even before the COVID pandemic).
So rather than tie themselves down to a single interest rate beat, Bullock and the bank want scope to broaden their monetary policy repertoire.
A central bank governor in a world where an incident on the other side of the world can push inflation up or down in suburban Melbourne needs as many options as possible.
Even the best live singers can make mistakes.
Bullock didn’t hit the high notes of the rest of her performance in answer to a question about the Reserve’s decision in November to lift the cash rate to 4.35 per cent.
Since that point, inflation has been lower than expected, the jobs market has lost steam and consumers have gone to rummaging around the bargain bin looking for discount copies of Taylor’s self-titled debut album.
According to Bullock, tightening monetary policy was the right thing to do.
“The short answer is we didn’t make a mistake,” she declared in a statement that could come back to bite in a big way.
The bank’s new forecasts revealed it has sliced the outlook for economic growth this year by half a percentage point to just 1.3 per cent. By any definition, that’s a pretty terrible performance for the economy.
After 45 minutes, Bullock walked away from her inaugural performance pretty happy with the message she imparted.
She even managed to relate inflation to the generation of Swifties, and their parents, about the trade-offs involved in bringing inflation under control.
“On Taylor Swift tickets, I’d say that from my own experiences that my kids put money away to do it,” she said. “People are deciding what’s really important to them and what’s not as important to them. Clearly, for a lot of people, Taylor Swift is very important.”
Bullock is not out of the woods yet, but her seven-year tour in charge of the RBA appears to have started well.
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