Reserve Bank of Australia Governor Michele Bullock has defended the central bank’s recent pivot to a more hawkish stance, characterising the battle against persistent inflation as "a bit of an art" rather than a precise science.
Speaking following the RBA’s first rate hike since 2023, Bullock acknowledged that previous 0.75 percentage point cuts had provided significantly "more impetus" to the economy—particularly the housing market—than policymakers had initially anticipated.
The governor noted that while monetary policy was previously considered restrictive at 4.35%, a surprising surge in private demand has shifted the landscape.
"Circumstances change, we change," Bullock stated, dismissing regrets over past cuts by highlighting that "soggy" domestic demand in early 2024 has since been replaced by consumption levels that are pushing against the economy's supply limits.
Bullock remained non-committal on whether this marks the beginning of a formal tightening cycle, describing the move as an "adjustment" rather than a repeat of the rapid post-COVID hikes.
She identified flagging productivity as a primary concern outside the bank's control, noting that if private demand exceeds the economy's potential growth of roughly 2%, inflation risks will escalate.
While under pressure to address the impact of government spending, Bullock maintained a strict boundary between fiscal and monetary policy, asserting the RBA’s independence.