In short:
The RBA deputy governor has identified inflation as the "one big problem" still facing Australia's economy.
asserted
governor → identify → economy
Andrew Hauser says the RBA stands ready to raise interest rates further if the central bank believes it is needed.
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it → say → rates
The RBA board meets at the end of September when the next rates decision is made.
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decision → meet → September
The Reserve Bank's Deputy Governor Andrew Hauser knows Australians are "furious" about inflation and while he is determined to bring it down, he says the RBA is not at the point where it has to take more drastic action.
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it → know → action
In a wide-ranging interview, Mr Hauser told 7.30 that inflation is the major problem for Australia's central bank, as he acknowledged Australians are struggling with the continued high cost of living and rising interest rates.
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Australians → range → living
He indicated those rates could rise higher in the coming months.
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rates → indicate → months
While Mr Hauser defended the Australian economy as "doing quite well" on issues of unemployment and real household incomes, he signalled out the continuing scourge of inflation as the nation's biggest problem.
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he → defend → problem
Headline inflation rose to 3.5 per cent in the year to July, despite the continued efforts of the RBA and government to bring it down.
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inflation → rise → it
Mr Hauser acknowledged the anger and frustration in the community.
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Hauser → acknowledge → community
"People are furious about inflation," he said, calling it the RBA's "one big problem".
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he → say → it
"I understand why.
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I → understand → ?
It hits people on low incomes, it damages price signals, it makes the job of companies difficult.
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job → hit → companies
"What [people] want us to do is our job and bring inflation down.
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us → want → inflation
"Everywhere I go, I hear cost, cost, cost, inflation, inflation, inflation, and that's our responsibility.
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that → go → inflation
We have to put that right.
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We → have → that
"When people go to the supermarket every week, they look at the price of the goods they're buying, they compare them to where they were a few years ago and they say, 'Hell, what's going on here?'.
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what → go → them
"That is a very lasting and pervasive issue that is a function of the pick-up in inflation after COVID and will take years for us to fully resolve."
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us → take → years
As to why Australia is still struggling with inflation, Mr Hauser says it is a three-headed monster.
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it → struggle → inflation
One is the Middle East and the ongoing crisis there, one is a really unexpected global boom driven by AI, and one is the weakness of the supply potential of the Australian economy."
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one → drive → economy
Rate hike not 'inevitable' but likely
One solution to fixing inflation could be hiking interest rates dramatically, but Mr Hauser said the RBA was unlikely to do that just yet.
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RBA → fix → that
"We could raise interest rates sharply [and] we could do it tomorrow,"he said.
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we → raise → it
"We could decide, 'You know what?
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You → decide → what
We no longer take seriously the full employment part of our objective.
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We → take → objective
We're going to bring inflation down come hell or high water.'
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We → go → inflation
Mr Hauser said Australia was not at that point just yet but gave a strong indication that the central bank is contemplating hiking interest rates this month as the economy continues to grow — albeit slowly — and the labour market remains tight.
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market → say → rates
He denied a rate hike was "inevitable" but said the bank was very focused on bringing inflation down.
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bank → deny → inflation
"Inflation is too high and that's why we raised interest rates three times at the beginning of this year," Mr Hauser said.
"
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Hauser → raise → year
The question now, frankly, for us is have we done enough or is more needed?"
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more → do → enough
Australia's four major banks are all forecasting the central bank will lift interest rates by 0.25 percentage points to 4.6 per cent by the end of the year.
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bank → forecast → year
Mr Hauser's comments came hours after his RBA colleague, assistant governor Sarah Hunter, said the central bank "may well have to raise interest rates" if it senses inflation is stronger than its forecasts."
The RBA board will meet at the end of September to decide whether to move or hold the cash rate — currently sitting at 4.35 per cent.
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board → come → cent
New inflation figures, however, will only become public a day after that crucial decision — on September 30.
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figures → become → September
Asked about the current downturn in the housing market, Mr Hauser said the bank was watching it closely as the price adjustment will have an impact on consumption growth.
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adjustment → ask → growth
He expected prices to fall "a little bit more" but said current conditions in the housing market are not a key factor in the bank's forecasts.
"While house prices play a role in the economy, they're not really as big as some of the things we talked about earlier in the conversation, global growth trends, productivity, the risk environment globally, in the Middle East and so on and so forth," he said.
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he → expect → East
Persistent inflation eroding trust in central banks
Compared to nations including the UK, Canada and the US, Australia has been slow to bring inflation down.
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Australia → erode → inflation
The RBA projects inflation will return to its target by early 2028.
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inflation → project → 2028
Last year, the central bank began cutting interest rates before being forced to change course this year just before the war in Iran started.
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war → begin → Iran
Mr Hauser said that at the time it looked like a "sweet spot" but that the RBA had consistently updated its position when needed.
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RBA → say → position
"When the facts change, we change our position," he said.
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he → change → position
"We raised interest rates earlier than other central banks and ... we stand ready to do so again if we need to do."
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we → raise → banks
Mr Hauser rejected the notion that the RBA was not prepared to answer a question on the role of government spending in the economy.
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RBA → reject → economy
…and 13 more, not listed.
The Aporia