RBA chief links public sector to productivity slump

Reserve Bank of Australia Governor Michele Bullock has clarified the drivers behind the nation's cooling productivity, noting that while the expanding public sector plays a role, it is not the primary culprit.

Testifying before Senate estimates, Bullock acknowledged that growth in non-market service areas—specifically healthcare and aged care—has contributed to the slowdown.

She cautioned, however, that these sectors face significant "measurement issues," as tracking output in care-based services is notoriously complex.

"Our analysis suggests there’s a little bit of that," Bullock stated, though she emphasised that the shift toward public services is not the "main game" regarding Australia’s broader economic challenges.

Senate Economics Legislation Committee Session

The Governor also addressed concerns regarding the central bank's independence, firmly rejecting the notion that Treasury Secretary Jenny Wilkinson's presence on the monetary policy board invites government interference.

Despite Wilkinson’s ties to the Treasury, Bullock insisted there is no risk of her voting at the direction of Treasurer Jim Chalmers.

Citing the recent RBA review, Bullock affirmed that the Secretary serves as an individual expert rather than a political representative.

Furthermore, Bullock highlighted nuances in how government spending influences the economy. She noted that while direct "public demand" is a key metric, it excludes significant transfers like pensions and JobSeeker payments.

These subsidies, along with relief for childcare and electricity, effectively boost household disposable income.