Michele Bullock’s sentence: 7 years hard Labor

The prime task of the incoming governor of the Reserve Bank, Michele Bullock, is to get inflation down into the 2-3 per cent range and keep it there. It’s a highwire act.

Has the penny dropped yet, Michele?

That you’ve allowed yourself to be sentenced to seven years hard Labor? With no prospect of time off for good behaviour?

The prime task of the incoming governor of the Reserve Bank, Michele Bullock – her “day job”, so to speak; her prime KPI in the modern jargon – is exactly the same as that of her predecessor Philip Lowe and indeed of his predecessor Glenn Stevens and those before him.

Simply, to get inflation down into the 2-3 per cent range and keep it there.

Yet she comes into the job with the Labor governments of our two biggest states, NSW and Victoria, and the federal government itself, the very government that appointed and tasked her, joined in making her task all but impossible.

The Victorian government, as I’ve discussed, has done this by locking in (at least) high single-digit inflation in housing and construction with its crazy insane “big build” spendathon.

The NSW government, by locking in 5 per cent wage rises across the NSW public sector, the single biggest employer in the nation. But frankly, they are pikers compared with the inflation-sparking frenzy of the Albanese federal – to stress again, Labor – government.

First off is the crazy insane assault on (once was) cheap electricity and gas.

It should be obvious to even the meanest intelligence that 20 and 25 per cent increases in power costs are not exactly compatible with 2-3 per cent inflation. The single biggest criticism of the PM, and indeed the Treasurer, is that they have allowed the so-called Energy Minister Chris Bowen to get around without his keeper and his straitjacket.

The federal government has also joined with the NSW government in seeking to unleash a mini-wages explosion across the federal public service – committing to at least 4, and that means in practice 5 per cent, wage rises.

Yes, the government did not deliver the crazy insane 6-9 per cent national wage decision. But it all-but aggressively promoted it.

As the always polite Governor Lowe has, politely, pointed out, 4 per cent wage rises – and even, at an aggressive touch, 5 per cent wage rises – would be acceptable and compatible with 2-3 per cent inflation if we had significant and sustained productivity growth.

Yet we have an Albanese – to stress again, Labor – government – all-but committed to an anti-productivity agenda, right across the board from energy to workplace structures and wage-setting dynamics.

The current 6 per cent inflation – we’ll get the latest figure next week – might have been sparked by events out of the control and indeed before the Albanese government.

They were the massive over-the-top Covid spending and then Ukraine. But it is what the Albanese government has done subsequently that threatens to lock it in – leaving Bullock and what will be her “new” RBA with a fundamentally unpalatable choice.

Do they keep interest-rate squeezing until the pips squeak? Do they accept a messy mix of, say, 4-5 per cent inflation and a similar 4-5 per cent unemployment rate?

And in the process, cop abuse across the board, for still too-high inflation; too-high jobless; and still too-high interest rates?

Originally published as Michele Bullock’s sentence: 7 years hard Labor