‘Aligned’: Chalmers fends off rift with RBA

Treasurer Jim Chalmers says the Reserve Bank and the government are on the same side in the fight against inflation, fending off perceived criticism from the RBA over spending.

In comments since the RBA board meeting early in August kept the official interest rate on hold at 4.35 per cent, governor Michele Bullock signalled state governments were driving a “large chunk” of the surge in public spending.

She also pointed to major infrastructure projects exacerbating the housing crisis.

The Opposition has accused the Albanese government of overspending, exacerbating the ongoing inflation problem keeping homeowners’ interest rates up.

But in question time, Mr Chalmers deflected that criticism, saying the government’s cost of living measures – including energy bill relief, cheaper medicines and early childhood education, rent assistance and wage increases for low paid workers – were not inflationary.

“Governor Bullock has made it really clear in the last week that government and the Reserve Bank are aligned when it comes to the fight against inflation,” Mr Chalmers told parliament. “And she’s also made it clear that we have the same objective here to get on top of inflation, but we have different responsibilities as we go about it.

“The responsibility that we have in common is to get on top of inflation together without smashing the labour market or smashing the economy which is already soft at a time of substantial global economic uncertainty.”

The RBA released the minutes for the August board meeting on Tuesday, where board members discussed inflation remaining sticky above the 2-3 per cent target and the unlikelihood of the cash rate being cut ‘in the near future’.

The board ended up keeping the rate on hold at its August meeting, but reiterated that a rate cut was not even discussed in its minutes, released on Tuesday.

Ms Bullock has in the past two weeks given a detailed press conference and a speech and appeared before a parliamentary committee, where she alluded to government spending.

Mortgage holders should not expect a cut to the 4.35 per cent rate in “the short term”, the board said, after RBA forecasts pushed out the timeline for inflation to return to the RBA’s target range of 2-3 per cent.

Mr Chalmers said there were “no surprises in the minutes”.

“We are, as a country, making really substantial progress on Australia, but we do need it to moderate further and faster because people are under pressure, and that’s something that the government understands as well.

“We’re also working through the structural pressures on the budget as well.

“Government spending is not the primary determinant of prices in our economy, but we can help and we are helping, and surplus is a part of that effort.”