By David Crowe
Labor has sharpened its criticism of the Reserve Bank in a growing dispute over economic hardship and rising prices, sending a new message to Australians that the central bank is wrong to say the economy is growing too fast.
Government Services Minister Bill Shorten heightened the concern about the central bank’s view by warning that the wrong call could “drive the economy into a brick wall” when growth was not as strong as the RBA claimed.
The blunt warning comes after a week of division between the government and the central bank over economic policy, with Reserve Bank governor Michele Bullock last week naming federal and state spending as a factor that kept inflation too high.
Reserve Bank assistant governor Sarah Hunter last week said the economy was running “a little bit hot”, adding to the pressure on inflation, but Treasurer Jim Chalmers said the data showed this was not the case.
While cabinet ministers have tried to avoid an open breach with the bank, Shorten was asked on Wednesday morning about his view of the economy, and he responded with a robust criticism of the bank.
“The RBA is independent but that doesn’t mean that they’re immune from being disagreed with,” he said, noting the central bank had fumbled its inflation and interest rate forecasts after the pandemic.
At odds: Government Services Minister Bill Shorten and Reserve Bank governor Michele Bullock.Credit: Alex Ellinghausen, Dominic Lorrimer
“I do not believe the economy is running hot for most Australians,” he said.
“There are some Australians who are doing very well, but for most Australians, we’re seeing their savings being reduced, we’re seeing their cost-of-living pressures.
“The way to deal with it, though, isn’t to push this nation into recession with higher and higher interest rates.”
Bullock said last week the RBA board had considered lifting the official cash rate above 4.35 per cent – the level in place since a rate hike in November – and sent a strong signal that Australians should not expect a rate cut this year.
While some senior Labor figures believe they will have to go to the election by May next year without a cut to interest rates and an easing of the pressure on households, others think there is a chance of a rate cut early in 2025.
Prime Minister Anthony Albanese and senior cabinet ministers talked up their economic plans on Tuesday in a series of “Dorothy Dixer” questions from Labor MPs, while the Coalition did not ask about the economy and focused on questions relating to conflict in the Middle East.
In a separate challenge to Labor economic policy, crossbench MPs warned against a draft government law to tax unrealised gains at superannuation funds. Independent MP Allegra Spender proposed an amendment to allow the deferral of payment for taxpayers who might otherwise be forced to sell their assets.
But Spender and other independents backed the government on its build-to-rent housing plan, and said the Coalition and the Greens should stop delaying the government’s attempts to increase the housing supply.
Coalition finance spokeswoman Jane Hume said there was “open warfare” between Labor and the RBA when independent economists were saying that government spending was keeping interest rates higher for longer.
“Labor’s bovver-boy ministers would rather criticise the independent RBA than make the hard decisions to reduce spending,” she said.
Hume said Australian families were making tough choices about their household budgets every day, but Labor would not do the same with the federal budget.
Shorten said those who wanted higher interest rates would only “drive the economy into a brick wall” when conditions were already difficult for households.
“The economy is not hot, and anyone who thinks it is hot should get out and start talking to a whole lot of small businesses in the high street of the suburbs and regions of Australia,” he said.
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