Reserve Bank of Australia Governor Michele Bullock has directly challenged the Federal Government’s economic narrative, testifying before a parliamentary committee that high public spending is a primary driver of Australia’s stubborn inflation.
Just three days after the RBA lifted the cash rate to 3.85%—the first hike in over two years—Bullock contradicted Treasurer Jim Chalmers' assertion that the private sector was solely responsible for price pressures.
Addressing the House of Representatives economics committee, Bullock agreed that government outlays have bolstered "aggregate demand," which currently exceeds the economy's ability to supply goods and services.
"Total demand is too high and that’s what's giving inflationary pressures," she noted, defending the decision to tighten monetary policy to protect vulnerable Australians from the "hurt" of rising costs.
As the RBA prioritises a "low and stable" price environment, the pressure now shifts back to the Treasury to reconcile its spending levels with the central bank's cooling efforts.