‘Too far’: ALP frontbencher’s warning to Reserve Bank

A government minister has warned the RBA against going ‘too far’ in its fight against inflation, despite Jim Chalmers denying he was attempting to influence the decisions of the independent central bank.

On Tuesday, Dr Chalmers insisted he was ‘not ­taking a shot at anyone’ in claiming Wednesday’s national accounts data, which is expected to show growth slowing to a crawl, would show the impact of rate hikes.

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A government minister has warned the Reserve Bank against going “too far” in its fight against inflation, despite Jim Chalmers denying he was attempting to influence the decisions of the independent central bank after declaring its rate hikes were “smashing the economy”.

With Anthony Albanese and the Treasurer playing down claims the government was moving to blame expected anaemic growth figures on the RBA, Assistant Immigration Minister Matt Thistlethwaite said “we don’t want to see the Reserve Bank go too far”.

“We want to make sure that we do continue to grow as an economy, and importantly, the people remain in employment,” Mr Thistle­thwaite told Sky News.

UNSW economics professor Richard Holden accused the Treasurer of making a “veiled threat” to the central bank, after Dr Chalmers said the economy was suffering because of the impact of interest rates.

“It’s pretty strong language coming from the Treasurer,” Professor Holden said.

“If the Treasurer is being honest with himself, he’d sit there and say ‘Look, there’s probably not going to be a cut before the election – so what am I waiting for?’ ”

RBA governor Michele Bullock has dismissed the chance of a cash rate cut this year, citing continued uncertainty over the path of inflation – currently at 3.5 per cent – back to its 2 to 3 per cent target band.

On Tuesday, Dr Chalmers insisted he was “not ­taking a shot at anyone” in claiming Wednesday’s national accounts data, which is expected to show growth slowing to a crawl, would show the impact of rate hikes.

“That’s just recognising the facts of our economy right now,” he told reporters in Perth.

Independent economist Saul Eslake said a modest increase in unemployment, which has risen only 0.6 percentage points from its low of 3.5 per cent, was indicative that the RBA’s monetary tightening was “far from smashing the economy”.

“The way the Reserve Bank has conducted monetary policy here, although you can criticise it for not bringing inflation down as quickly as other countries, has prevented the unemployment rate from rising as steeply,” Mr Eslake said.

Former RBA official turned Centre for Independent Studies chief economist Peter Tulip said it was vital to press forward with the planned overhaul of the central bank to protect the institution’s independence.

“We need to put in place a structure for the Reserve Bank such that we can be confident it’s making decisions independently of political pressure,” Dr Tulip said.

“We do not have that at present,” he said.

“The RBA review suggested a string of recommendations that would make the bank more independent, and parliament has been negligent in not passing the RBA reforms.”

Opposition Treasury spokesman Angus Taylor accused Dr Chalmers of “fighting everybody except inflation”.

“He’s fighting the Reserve Bank, of course, Productivity Commission, Peter Dutton, he’s fighting his own mentor, Paul Keating over superannuation taxes, and he’s fighting the laws of economics,” Mr Taylor said.

“I would have thought that the Treasurer might have been better advised to have highlighted that aspect.”

The stoush over the economy comes as Labor braces for Wednesday’s GDP figures, which are expected to show the economy expanded by 0.2 per cent in the June quarter, slashing annual growth to 0.9 per cent for the last financial year.

A suite of business indicators released on Monday by the Australian Bureau of Statistics showed the economy was slowing, with company gross operating profits falling by 5.3 per cent in the June quarter.

Driving the decline was a 10.9 per cent fall in mining profits on the back of weaker commodity prices for iron ore, coal and liquefied natural gas. With mining excluded, profits slipped 0.9 per cent.

Outpacing the profit slide was an uptick in the private sector wages bill, which climbed 0.7 per cent in the June quarter but still remained weak by historical standards.

Meanwhile, inventory investment is expected to subtract 0.5 percentage points from the June GDP result as businesses barely changed their stock levels.

Economists will tweak their forecasts ahead of the GDP figures with separate ABS data covering government expenditure and Australia’s trade account to be released on Tuesday.