The Reserve Bank chief has been slammed for telling an international conference frustration over interest rate hikes was just ‘noise’.
Michele Bullock, who earns more than $1million a year, was speaking in Hong Kong at a meeting of central bank governors on Tuesday, which also included her predecessor Philip Lowe.
The RBA this month, on the new governor’s watch, raised interest rates for the 13th time in 18 months to a 12-year high of 4.35 per cent.
This has seen monthly variable mortgage repayments soar by 69 per cent since May 2022, when the cash rate was still at a record-low of 0.1 per cent.
‘We have, like other countries, raised interest rates much more quickly than we have in the past and that has created in fact a lot of political noise and a lot of noise from the general public,’ Ms Bullock told the conference.
‘Despite that noise, households and businesses in Australia are actually in a pretty good position. Their balance sheets are pretty good.’
RBA Governor Michele Bullock told a Hong Kong conference this week frustrations over interest rate hikes were ‘noise’
Ms Bullock said households had built up ‘large savings buffers’ through the Covid pandemic which had remained ‘largely intact’.
‘Housing prices are rising again, much to everyone’s surprise, so that’s sort of helping people feel a little bit more wealthy,’ she said.
Sydney’s median house price has soared by 12.1 per cent since January to an even more unaffordable $1.397million, CoreLogic data showed, stopping younger people from getting into the property market as population growth soars.
Ms Bullock said the RBA needed to be ‘a little bit careful’ to not unnecessarily restrict economic activity as rate rises brought down inflation.
‘We want to make sure that we keep inflation under control and we bring it back down to our band of between two to three per cent,’ she said.
She made the observation before new official data showed inflation in October moderating to 4.9 per cent, down from an annual pace of 5.6 per cent in September.
The Reserve Bank, however, is still expecting inflation to take longer to moderate, falling back within the two to three per cent band in late 2025 instead of mid-2025, with electricity and gas prices still climbing by double-digit figures over the year.
Ms Bullock said the RBA would ‘also need to make sure we do that in the context of not imposing on the economy too much and raising the unemployment rate’.
Speaking to Sunrise host Nat Barr on Wednesday, journalist Justin Smith said ‘people will be angry’ at the comments.
‘They’re very old fashioned in their approach, aren’t they? They think they can go away to a conference somewhere and say something and it won’t kind of get back to us,’ he said.
‘But it’s a real view into the way that they think to describe the interest rate hikes and what that’s done to people as noise.’
Barr noted Australians had spent $6.36billion on the Black Friday sales.
‘There is money in this economy. Somebody is spending. Does she have a point?’
Journalist Justin Smith told Sunrise host Nat Barr that Ms Bullock’s comments were an interesting view into the way someone in her position views the rate hikes
TV commentator Deb Clay said the ‘remit’ of the RBA was to look at the big picture or macro economic view.
‘When it comes to café spending, for instance, you know the figures show that spending has gone up,’ she said.
‘But try and say that to a cafe owner in in Kellyville Ridge in Sydney’s north west, who doesn’t know if they’re going to be able to keep their doors open for the next month.’
Ms Bullock earned $828,313 as deputy governor and would now be on a $1.1million remuneration package, which was the total pay for her predecessor Dr Lowe.
‘There’s no person behind the story that Michele Bullock and it is telling, particularly after the some of the insensitive comments from Philip Lowe,’ Ms Clay said.
During the prolonged lockdowns in Sydney and Melbourne and 2021, the banks were offering fixed mortgage rates starting with a ‘two.’
But now variable mortgage rates are approaching the seven per cent mark for those with a 20 per cent deposit.
While variable rate borrowers have been forced to manage a 69 per cent surge in monthly mortgage repayments, many fixed borrowers are still to be hit.
The Reserve Bank is expecting 880,000 fixed mortgage rates to have expired in 2023, followed by another 450,000 in 2024 – meaning more than 1.3million borrowers would have felt the pain by next year.
Those in this position would be moving on to a higher default variable that RateCity calculated would be 3.33 percentage points above the RBA cash rate.
This would see many borrowers abruptly move to a 7.68 per cent variable rate unless they refinanced.
The Reserve Bank is expecting 880,000 fixed mortgage rates to have expired in 2023, followed by another 450,000 in 2024