Michele Bullock has issued a word of caution to the Australians hoping for an interest rate cut, warning it won't bring any relief unless inflation is under control.
The Reserve Bank governor said while she wants to provide relief to households struggling with mortgage repayments, bringing the CPI back to target was the bank's immediate priority, saying "inflation is actually the thing that is hurting absolutely everyone".
"If it looks like we were going to meet our target, then we will remove the restrictive nature of monetary policy. That's what we will do," she said.
"But what I want to emphasise to people is that the precondition for that is that inflation needs to be coming back down and be sustainably back in the band on the board's timetable, because if it's not, we can't remove the restrictiveness of monetary policy.
"It won't be good for people now because inflation will be hurting everyone.
"It won't be good for those people on mortgages, because inflation will still be high. And it won't be good ultimately for employment, because it will mean that we'll have to act harder in the future in order to get inflation back down."
While inflation has moderated from its high of 7.8 per cent in December 2022, it remains well above the target of 2-3 per cent and data in recent months has come in higher than expected.
That has fuelled fears of another rate hike – or at the very least a delay to when the first cut will come.
But while the remaining per cent or so of the CPI appears to be the most difficult to bring under control, Bullock said she doesn't expect last month's federal budget – and its $300 in energy relief for every household – to add to inflation.
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"I think the quantums are small enough that they aren't really going to (add to inflation) … When you think of that $300, are people going to go out and spend up big on that? No, I don't think so," she said.
She said the fact the relief will come in the form of four $75 rebates, rather than a $300 cash payment, reduces its chance of being inflationary.
"Psychologically I think it's different because if you hand anyone $300 and say, 'Here you go, go and spend it,' they'd see that differently," she said.
