In a recent admission, Reserve Bank of Australia (RBA) Governor Michele Bullock acknowledged that the bank was slow to respond to rising inflation by increasing interest rates. Reflecting on past decisions, Bullock stated, “The board doesn’t want to be late, and arguably we were late raising interest rates on the way up.” She emphasised the importance of cautious planning for future reductions in interest rates, noting that any cuts should not occur until there is sufficient confidence in returning to the target inflation band.
Under her predecessor, Philip Lowe, the RBA maintained an emergency low cash rate of 0.10 per cent until May 2022, by which point inflation rates had significantly surged, with headline inflation reaching 5.1 per cent.
While the recent 25-basis-point cut marked the first relief since November 2020, Deputy Governor Andrew Hauser signalled that additional cuts this year are improbable, cautioning that reducing rates prematurely could hinder inflation control.
In her committee remarks, Bullock reiterated the RBA’s commitment to ensuring the availability of cash as a viable payment method for Australians, especially amidst increasing economic uncertainty. She highlighted the need for a sustainable cash distribution model, underscoring cooperation across the industry to meet community needs.