Five takeaways from Michele Bullock's February press conference


From tackling inflation to Taylor Swift tickets, what did we learn from RBA governor Michele Bullock's first post-meeting press conference?

Once the news came through yesterday afternoon that the Reserve Bank Board had kept the cash rate on hold at 4.35%, attention quickly turned to the most novel part of the day's proceedings: governor Michele Bullock's first post-meeting press conference.

After delivering a quick speech of her own the governor then took questions from members of the media on everything from tax cuts and services price inflation to the future direction of rate movements. Here are five takeaways from Bullock's address:

michele bullock comments on taylor swift tour during february rba press conference

1. The inflation battle continues

Last week the latest Consumer Price Index came out showing that annual inflation had eased to 4.1% in December. While the result shows that inflation is continuing to ease, Bullock made clear that the battle to tame inflation is by no means over.

"It's fair to say the Board does understand that people are doing it tough and a big reason for that is inflation, which is why it's so important that we get inflation down.

"We have made good progress but there is more work to do. The job's not done, and the best thing that we can do with our tool [monetary policy] is to help households deal with the cost of living by getting inflation down. That's our aim. We want it back in the background again.

"Looking ahead, our central forecast is that inflation will return to the target range of 2-3% in 2025, and it will reach the midpoint of the target range in 2026."

2. Nothing's in or out when it comes to the cash rate

Despite repeated questions about the possibility of cash rate cuts later in the year, Bullock refused to be drawn into speculation. Instead, she maintained that the Board was keeping its options open and would base any future decisions on the data it receives.

"I would say we have maintained the option that there might have to be more rate rises, but there might not be either - nothing's in, nothing's out. The optionality here really needs to be maintained because we need to be driven by the data.

"I really understand that mortgage holders are sweating on this, but the big issue that's confronting not just mortgage holders, but everyone, is inflation. And the fact that inflation is so high in so many parts of their lives at the moment is really what's hurting them."

3. Services inflation is tricky, but it won't break any broken toes

One of the consistent concerns highlighted in the Reserve Bank Board's post-meeting statements in recent months has been the stickiness of services price inflation. But what is services inflation?

It's a question that Bullock was keen to address, along with the role that the Reserve Bank can have in bringing it down using inflation related to insurance costs as an example.

"We were talking to colleagues about what services inflation is because I think that people don't quite get it. One of our colleagues said that services inflation is anything that you can't drop on your foot."

"The insurance sector has its own issues going on and there's not a lot that monetary policy can do on that. Insurance costs and the way insurance is moving in relation to climate change, the effect on premiums, profit margin rebuilding and reinsurance costs - these are things that monetary policy can't do anything about. So this is much more a matter for the government."

4. The unknowables are always a concern  

Asked if there is anything that keeps her up at night, Bullock mentioned the balancing act the Board has with the economy, employment and inflation.

"What worries me most is that we don't manage to bring inflation back down to target without collateral damage, if you like. With more damage in the labor market than we can avoid. I really am convinced - and the Board is convinced too - that we can manage this."

Bullock also mentioned unknowable events (like the pandemic) as a concern given that they ultimately can't be predicted or prepared for.

"So the thing that really worries me is that we get some more shocks and we don't know where they're coming from. You look at the last few years and the pandemic, the Ukraine conflict, what's happening in the Middle East.

"What's going to come from left field - that's what worries me. What I don't know is coming and what the implications will be on inflation, inflation expectations and how we handle that."

5. The reach of Taylor Swift is boundless

On a lighter note, Bullock was also asked about the upcoming Australian leg of Taylor Swift's Eras Tour in the context of services price inflation. While the governor didn't quite weigh in on the impact it would have on inflation, she did offer a Taylor Swift anecdote of her own.

"On Taylor Swift tickets, I would say that from my own experience that my kids put money away to do it. They forewent other things in order to be able to afford Taylor Swift.

"So I think people are deciding what's really important to them and what is not as important to them, and clearly for a lot of people, Taylor Swift is very important."

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Tom Watson is a senior journalist at Money magazine, and one of the hosts of the Friends With Money podcast. He's previously worked as a journalist covering everything from property and consumer banking to financial technology. Tom has a Bachelor of Communication (Journalism) from the University of Technology, Sydney.