Jim Chalmers needs to resist giving Michele Bullock any other excuse to hammer borrowers
Not that anyone in Struggle Street will be throwing their hats in the air any time soon … a tentative sigh of relief at best.
But two reports out on Wednesday provided at least some hope that the Reserve Bank may have run out of reasons to keep punishing borrowers – and just in time for Christmas.
The surprise inflation result for October showed a significantly lower headline number. As always, there is a caveat. The numbers didn’t account for the stickier services inflation that the central bank is most concerned about.
Nevertheless, it would now be a crazy brave move by Michele Bullock to slap a back-to-back rate hike on mortgagees and businesses next week when the board meets for the last time this year. The markets are giving a close to zero chance of another rate hike now.
The Treasurer on Wednesday looked relieved after the monthly update.
Adding to the respite was an OECD report that effectively said it could see no justification for the central bank to raise rates any further into next year.
But then no one, especially Chalmers, anticipated just how bullish the new RBA governor would be. Bullock’s warning of a more punitive monetary approach to inflation clearly has the government spooked.
Chalmers may have been hoping for a softer touch in his choice of replacement for Phil Lowe. He got the opposite and his backbench got a new villain.
Chalmers has seized on two elements of the inflation numbers that can at least in part be attributed to government intervention. Lower energy and rental price increases courtesy of Labor subsidies.
Yet there is an internal constituency he has to concern himself with as well as the public messaging, which to date has been patently inadequate.
With the Treasurer and Finance Minister Katy Gallagher due to front a jittery caucus over their concerns that cost-of-living pressures could put some of them out of a job come the next election, lower inflation numbers couldn’t have arrived at a better time.
Chalmers will be arguing that what the government has been doing so far has been sufficient. At least for now.
With the surplus likely to be larger than expected in the mid-year update, the pressure to spend more of it to appease Labor MPs will be significant.
Just as Albanese and Chalmers claim to be holding the line on stage 3 tax cuts, so do they need to resist doing anything to give Bullock an excuse to hammer borrowers.
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Finally, some good news for Jim Chalmers.