“But the policy strategy required to deliver that outcome,and the economic judgments that inform it,simply cannot be stated with anything like the same degree of certainty. Those pretending otherwise are false prophets.”
Inflation in theJune quarter reached 3.8 per cent,in line with the Reserve Bank’s forecasts.
Hauser noted that while the bank’s forecast had been correct,inflation in previous quarters had been above expectations.
He said while there was a range of possible explanations,it appeared supply across the economy might have been a little weaker than the bank had expected.
Supply issues,such as those at the end of the COVID-19 pandemic,rarely respond to interest rate settings.
Hauser said there was also uncertainty about other key economic factors,including how quickly the unemployment rate might change over coming months or how businesses might deal with capacity constraints.
Household spending,which is particularly important for inflation,could alter depending on what Australians did with their money as real incomes picked up.
“Consumption also depends on the extent to which households choose to spend or save these higher incomes – and we are much less confident in that judgment,” he said.
In Canberra,the Coalition used the return of parliament after the winter recess to target the government over the cost of living and the level of government spending in the economy.
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Opposition Leader Peter Dutton called on Treasurer Jim Chalmers to resign after he said he took responsibility for spending decisions contained in this year’s budget.
Chalmers,in an indication the government is changing its political attacks on the Coalition,said Labor had improved the budget bottom line,which had reduced inflationary pressures.
“We turned two big Liberal deficits into two big Labor surpluses,designed our cost-of-living relief to put downward pressure on inflation,not upward,and are providing the responsible management they were incapable of,” he said.
But data this week could undermine the government’s rhetoric on delivering real wage growth to working Australians.
AMP chief economist Shane Oliver said the June-quarter wage price index to be released on Tuesday would probably show a 0.8 per cent increase for the quarter,bringing wage growth over the year to 3.9 per cent,down from 4.1 per cent.
“It would still be modest real wage growth and wouldn’t make up for the fall in the last few years,” he said.
“Unless there’s a shock,like a figure above 4.2 per cent a year,the RBA is unlikely to drop its tightening bias.”
At 3.9 per cent,wage growth would be just ahead of inflation.