The Reserve Bank Governor has admitted interest rates remained at record lows for too long during Covid – causing a cost-of-living crisis later.
Michele Bullock made the admission to the House of Representatives economics committee on Friday, three days after the RBA cut the cash rate for the first time since November 2020.
‘Arguably, we were late raising interest rates on the way up,’ she told teal independent Allegra Spender.
‘We didn’t respond as quickly as we should’ve to rising inflation.’
The RBA began the first of its 13 rate hikes in May 2022, but this occurred seven months after New Zealand began raising its equivalent cash rate.
Australia’s cash rate remained at a record-low of 0.1 per cent in 2021, even though headline inflation hit 3.8 per cent by the June quarter of that year.
Inflation remained well above the RBA’s 2 to 3 per cent throughout 2021 as Sydney and Melbourne residents were locked down for Covid, and Queensland and Western Australia closed their borders.
Australia already had an inflation crisis before Russia’s Ukraine invasion in early 2022 led to sanctions that pushed up oil prices.
The Reserve Bank Governor has admitted interest rates remained at record lows for too long during Covid – causing a cost-of-living crisis later
By the end of 2022, inflation hit a 32-year high of 7.8 per cent, even as the Reserve Bank pursued the most aggressive rate hikes since the late 1980s.
Ms Bullock become deputy governor to Philip Lowe in April 2022, after serving as an assistant governor of the financial system.
Her admission about RBA interest rate mistakes three years ago was made three days after Ms Bullock denied record-low interest rates from 2020 to 2022 had caused a surge in house prices.
‘The gist of the housing price problem comes down to a mismatch between supply and demand. I don’t think you can blame monetary policy on this,’ she told reporters in Sydney.
‘If you want to fix housing prices, you’ve got to go to different policies.’
