Reserve Bank governor Michele Bullock before senate estimates

Reserve Bank Governor Michele Bullock expects national accounts figures for the third quarter of 2024 to show that growth in the first three months of 2024 will be “quite low”.

Economists expect the figures to show that Australia’s economy grew by a measly 0.2 percent in the first quarter of 2024. Annual growth would therefore be just 1.2 percent – the weakest result outside of the coronavirus pandemic since the dot-com bust in 2000.

Asked by Liberal Senator Jane Hume whether the economy was experiencing a per capita recession – that is, population growth outpacing economic growth – Ms Bullock said the concept was unhelpful because recessions were associated with “job losses and human problems”.

“I just think the term ‘per capita recession’ is thrown around in a way that is not very helpful,” she said.

“We currently feel that the economy is weak and this is clearly reflected in consumption.”

Bullock: Persistent inflation would force interest rate hike

A resurgence in inflation or stronger-than-expected price pressures would force the RBA to raise interest rates again, Ms Bullock added.

“If we believe we are on the narrow path, we can basically stay exactly where we are: excluding nothing and allowing nothing,” she said.

“But if it turns out, for example, that inflation is rising again or that we cannot reduce it, we will not hesitate to take action and raise interest rates again.”

However, if growth is lower than expected, the RBA will cut interest rates, according to Bullock.

“If the economy turns out to be much weaker than expected and this increases downward pressure on inflation, we will consider easing monetary policy,” she said.

“Complex” budget issues not helpful, says Bullock
Ms Bullock dodged Senator Hume’s question about whether Finance Minister Jim Chalmers’ May budget was expansionary or contractionary in nature, arguing that the answer was not so simple.

“It’s a very complex question,” said Governor Bullock.
“The reason it is not easy is that it is not the only factor that influences whether we [in] an expansion or contraction phase.”
Not only the federal budget, but also national and international conditions will impact Australia’s inflation trends, Ms Bullock added.
“I don’t think it’s helpful to think about the budget and say it’s expansionary or contractionary without thinking about what else is happening in the economy,” she said.
US Treasury Secretary Steven Kennedy refused to answer a similar question from Senator Hume during the budget hearing on Monday.

There’s more to come

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