*AUSTRALIA CENTRAL BANK GOVERNOR BULLOCK COMMENTS IN SPEECH TEXT

*BULLOCK: `I AM 100% BEHIND’ CHANGES RECOMMENDED BY RBA REVIEW

*BULLOCK: RBA STILL SEEKING TO TREAD `NARROW PATH’ ON POLICY

*BULLOCK: RBA AIMS TO SLOW DEMAND GROWTH TO BRING DOWN INFLATION

*BULLOCK: MORE SUBSTANTIAL TIGHTENING IS RIGHT POLICY RESPONSE

*BULLOCK: INFLATION CHALLENGE NOW MORE HOMEGROWN, DEMAND-DRIVEN

 

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Australia’s Inflation Test Is More ‘Homegrown,’ RBA Chief Says
2023-11-22 08:35:00.6 GMT

By Michael Heath
(Bloomberg) — Australia’s remaining inflation challenge is
“increasingly homegrown and demand driven” compared with earlier
supply-side disruptions, with implications for policy, Reserve
Bank Governor Michele Bullock said.
“If inflation is simply the product of global supply
disruptions or other price rises” then the appropriate interest-
rate response would be limited, she said in a speech to
economists on Wednesday evening. “However, a more substantial
monetary policy tightening is the right response to inflation
that results from aggregate demand exceeding the economy’s
potential to meet that demand.”
The RBA resumed hiking earlier this month, taking the cash
rate to a 12-year high of 4.35% as economic growth and the labor
market prove more resilient to policy tightening than
anticipated. It also revised up its inflation forecasts that now
see consumer prices only reaching the top of the 2%-3% target in
late 2025.
Bullock underscored the various drivers of Australian
prices by noting that while it only took three quarters for
inflation to ease to 5.5% from 8%, it’s expected to take two
years for the print to fall that much again and go below 3%.
“This is because much of the remaining task of bringing
inflation back to target will require bringing aggregate demand
and aggregate supply into closer alignment,” Bullock said in her
address in Sydney. 
“That is what the board is aiming to do with monetary
policy – to slow the growth of demand enough to bring inflation
back to target while keeping employment growing,” she said.
Bullock’s predecessor Philip Lowe referred to this policy
approach as a “narrow path,” and the governor affirmed on
Wednesday that she is trying to stay on it.
The RBA has indicated that further rate rises will depend
on inflation and employment data and how the global economy
evolves. Many economists, including at Commonwealth Bank of
Australia, predict that the RBA is probably done hiking, though
National Australia Bank and Royal Bank of Canada are among a
handful that see at least one more hike to 4.6%.
Bullock’s speech to the annual Australian Business
Economists dinner was divided into two parts: the policy
response to inflation and the overhaul of the central bank in
2024, as recommended by an independent review.
She set out her position at the outset. “I want to begin by
making it clear that I am 100% behind the changes,” she said,
adding that as times change, so must the RBA. The goals she
outlined for the central bank included the following:
* Deep and informed deliberation: giving board members longer
time to consider policy and more diverse information, including
greater access to staff views and more scenario analysis
* Clearer explanations through better communication:
highlighting the appointment of a new chief communications
officer
* Bringing out the best in the RBA’s people: focusing on culture
and leadership; being more comfortable in having views contested
and strong internal debate