Fireside Chat
Fireside Chat at the Australian Chamber of Commerce and Industry (ACCI) Business Leaders’ Series
Andrew Hauser
Deputy Governor
Australian Chamber of Commerce and Industry (ACCI) Business Leaders’ Series
11 February 2026
–
Sydney
Audio
33.3MB
Watch video: Fireside Chat with Andrew Hauser, Deputy Governor, Australian Chamber of Commerce and Industry (ACCI) Business Leaders’ Series, Sydney
Moderator
Well, thanks. Thanks very much, Lyle. And welcome to Andrew Hauser for a fireside chat. In a few
moments we’ll be opening it up for discussion and going around the room and I’m sure
there’s plenty of questions and issues that people will want to raise with you. Andrew, before
we do that, I should say, of course, this room, this venue, has a very close association with the
Reserve Bank. For those who don’t know, this is the room in which the Reserve Bank Governor
gives her press conferences after the Reserve Bank board meeting. So a fortnight ago, the Governor
was standing here explaining the decision to raise the official cash rate target. So it’s done
in this room. Your office is just upstairs. So you didn’t have to come far, but I think
it’s a significant association. Look to get the ball rolling Andrew, I guess we’ve seen
that recent Statement on Monetary Policy. There’s been a lot of awareness, I think, about the
decision that was taken. We saw the Governor then also last week appearing before the House of
Representatives Standing Committee on Economics. So again, the perspective of the Reserve Bank has
been well out there in the public domain. But I guess maybe if you can just recap for us a bit of the
general context about how you see economic conditions, the outlook for inflation, monetary policy at
this point in time.
Andrew Hauser
Well, look, thank you very much all of you for the invite. When I arrived in Australia two years ago,
I made it a priority for myself to get out and about and meet with Australian businesses directly. I
actually expected people would say to me very early on, who the hell are you coming here to set
interest rates for another country? What do you know about us? And I considered it a priority to get
to know the country, its history, but also importantly its economy. It’s also great fun. I
should say that that’s a secondary objective. So I went to Townsville, my first visit. I saw the
university there, the port, the solar powered zinc smelter that is up there. I went to Gladstone to
see the liquid natural gas function, the aluminium smelter. I went to Brisbane to see the tourism
industry. I went to West Sydney and saw the university construction sector. These fantastic,
automated distribution centres. A number of retail companies have out there, the very latest
technology. I went to Melbourne, I saw the super funds. I saw shopping centres and pharmacists. I
went to Hobart, saw more zinc. I went to Adelaide and saw companies involved in beer, kangaroo meat,
that was a highlight, and chocolate. I went to Perth and saw the mining industry and I went to the
Pilbara on a special Visit which was outstanding, to see the iron ore business close up, including
some very scary small plane flights. I went to Shanghai as well and the last time I checked that
obviously isn’t part of Australia, but saw the Australian Chamber of Commerce out there and the
exporters and was really struck by their energy and drive. So look, what I came away from all of that
with was an incredible sense of the vibrancy, the diversity, the potential of the Australian economy.
It’s not just dig it and ship it, it’s much broader than that. I also heard, as someone
said earlier, the challenges and the business pressures that I know you’re dealing with and
I’m sure we’ll deal with today. But thank you for all the work that you do to drive this
economy.
Consistent with that many aspects of the Australian economy are actually doing pretty well. You
wouldn’t get that necessarily from listening to the press. Private sector growth recovered last
year quite strongly. The labour market’s been strong. Unemployment is close to historic lows.
The employment ratio to a population is at a record high. There’s 1.7 million new jobs
since COVID. Exports have held up unexpectedly, it might be said, on the back of a much stronger
world economy than all of us feared would happen as a result of the tariffs. And Australia remains
one of the wealthiest countries in the world. I often say coming from the UK, it is immediately
evident that the average standard of living, whether in the richest or the less rich parts of
Australia, it strikes you. The challenge we are dealing with, as you say Andrew, at the moment is
inflation. I regret to say that because obviously we’ve just come out of a big inflation
challenge, having been close to the middle of our target range, 2 to 3 per cent.
Underlying inflation is now up around three and a half. As is headline. That’s too high. And the
billion-dollar question is why has that happened? There’s a benign story that it’s a series
of one off factors, it should unwind. Certainly some of it, our team perhaps think even the majority.
But the less benign story is that some of it reflects growing underlying pressure of that pickup in
demand against supply constraints in the economy. And if that’s true, the risk is higher
inflation may persist and we can’t let that happen. Inflation at this level is too high and we
all remember the costs that excessively high inflation poses. We heard about it in its reduction to
households, to businesses, to everyone, right across the public and the private sector. And
that’s why we acted last week to raise the cash rate by 25 basis points and why I want to
say we will continue to do whatever is necessary to ensure that inflation does return to that target
band. So, over to you, Andrew.
Moderator
Thanks, Andrew. So maybe we talk about the elephant in the room and that’s not the little party
leadership for the moment. We’ll leave that to the politicians in Canberra. But no, look, I
guess last year, I think it was in November last year, you gave an interesting speech and you were
making the analogy of the Australian economy being a bit like a thoroughbred racehorse, possibly sort
of trapped on the rails, trying to find a way to surge forward, but ultimately boxed in. And I guess
that is a big issue that many in business are grappling with. And I think the practical implication
which you highlighted in your speech then, was that, effectively, at the moment, we’re operating
with a kind of speed limit, a capacity speed limit of around 2 per cent. If growth gets
much above that level, then we start to see inflationary pressures emerge. So surely a big part of
addressing that constraint is the supply side and productivity. And there’s been a lot of
discussion about how we get productivity going, whether that’s through stronger business
investment, capital deepening, whether it’s labour and skills, whether it’s technology, AI,
regulation, less red tape. I guess I just wanted to draw on your perspectives as a central banker. Do
you see from your research, are there particular areas that you would emphasise out of those or
others that really would help us to address those capacity constraints in the economy?
Andrew Hauser
Well, we’re not the experts on productivity. You are. The length of that question and the
sophistication of that question shows that you’ve probably got more ideas about it than me. But
the famous economist Paul Krugman said that productivity isn’t everything, but it’s almost
everything. And I would say that my reflection, and it’s not our policy, it’s not our
issue, is that really of all the issues facing the economy over the medium term, raising the
sustainable growth rate is the biggest issue. Now, the good news is Australia is not alone. Maybe
it’s bad news. US obviously appears to have strong productivity growth. When I think about my
own country in the UK, productivity growth has also been very weak. If I think about Germany, if I
think even about many of the countries in Asia, we are all seeking that next source or that wave of
growth. The good news is that Australia has done incredibly well over the years at marshalling its
resources, which are truly impressive, whether it’s the stuff below the ground, the human
capital, the institutional strength, the geographical position, the business smarts, of people in
this room to harness the challenges that the world economy and the domestic economy pose. The
challenge is, as I think you’re saying, that it will take action, if I may say so, and you said
this might evince a groan for the room, but since when you said, or someone said, who loves the RBA?
And there was a kind of one cheer. I’ll say it anyway. It’s a job of government, but
it’s also a job of industry. And I know industry knows that. Investment growth, in fact, in
Australia has been quite weak in recent times. And I suspect you and others in the room will tell me
there are good reasons for that. And some of those relate to policy and so on and so forth. But it is
a partnership issue.
And as I say, one of the great things I brought back from this, someone called it a royal tour around
Australia, which I shouldn’t, which it certainly wasn’t. But this, this tour around
Australia’s business highlights is that there is innovation everywhere you look, there is
business nous everywhere you look. And it is a question of harnessing that. People have done a lot of
research, haven’t they, on what the sources of productivity slowdowns in Australia and elsewhere
might have been, whether it’s competition. You actually gave a better list than I can give,
frankly. You mentioned skills, you mentioned competition, you mentioned capital deepening, you
mentioned red tape in all these various forms. I think it was one of those questions. I’m not
quite sure if I can add anything to that list, but it is a priority. One final point, I don’t
want this to sound like a cop out, but we have to take productivity as a given. And sometimes I think
it’s thought, well, look, can you do something about it? Could you run easier policy for a
while, please, mate, while we work out how to sort productivity out? We cannot do that. We have to
respect the speed limit of the economy for exactly the reason you described, that if we try and run
the economy hotter than it can run it, inflation will pick up. And that’s certainly, you and I
know the number one issue that harms productivity growth is uncertainty about inflation, and
that’s our contribution to the productivity game. I’m afraid it’s not as rich an
answer as you would like, but I do agree with you and thoroughly underscore its importance. I take
comfort from the fact that the government also lists it in its top three priorities this year. And I
think, I think. You were at the roundtable, weren’t you?
Moderator
I was, yeah.
Andrew Hauser
I think the roundtable was a great start at recognising the challenge, being brutally honest about
the challenge the country faces. The next step is obviously solutions, and I know people are working
at that.
Moderator
Okay, so we’re going to open it up to the floor. So I’m sure there’s plenty of
questions out there. I’m just looking around to see who’s going to be the first cab off the
rank.
Questioner
Thank you. The housing industry, of course, we love a conversation about inflation and interest
rates. And I’d be curious first up just to understand. Housing, of course, is one of the major
economic challenges we have at the moment. Higher interest rates are going to lead to a slowdown in
building activity. Housing, of course, major contributor to inflation. Fewer homes, more housing
inflation. That perpetual cycle there around higher rates and higher house prices is something that
I’d be interested in, how much that plays into consideration in future interest rates.
Recognising, of course, we’re not all of the economy, but we are one of those major productivity
constraints now. But secondly, on the topic of macroprudential restrictions, whilst interest rates
are the most urgent factor we have, macroprudential restrictions are probably the most important we
have. And late last year we saw APRA wander into the topic of using macroprudential restrictions to
force investors out of the established housing market, which looks a little like macroprudential
restrictions, moving away from the goal of system security into what would be more political
objectives. So my question would be, at what point do you think, given that we have extraordinarily
low mortgage default rates, rates that are approaching zero, at what point is it appropriate to start
winding back some of the last 15 years’ worth of macroprudential restrictions?
Andrew Hauser
You guys are good at long questions, aren’t you? The good thing is I can pick and choose what I
answer. And I think look on your first thing about house prices, right? I mean, the Turkish Prime
Minister, you may know, has a Turkish view of economics, which is that higher interest rates raises
inflation and therefore lower interest rates will lower inflation. I was brought up using models and
economic analysis that suggested that actually it’s lower interest rates that drive higher
prices. And in fact, that is what we have seen over the course, as you know, of 2025. And that’s
part of the transmission mechanism. It is an important part of the transmission mechanism. So if
house prices didn’t respond, that would be a problem. But in the long run, real house prices
reflect the balance between the demand and supply for housing. They are indifferent to, there’s
lots of evidence of this, to the level of interest rates in the medium to long term. And so the
challenge in the housing market, as I think you know and I’m sure you support, is how to boost
housing supply. Actually I think this is an interesting fact and maybe I’ve got it off you, I
don’t know. Australia is actually quite good at building houses per capita of population.
It’s sort of up there amongst other countries. The problem is it needs to build a lot of houses
and the supply elasticity of housing is quite low. I’m quite interested in some of the
technologies that could be used to improve the speed and pace of construction. I know you’ve
done some work on this as well. There’s a great company out in Western Australia that’s
built this robotic house builder that can put a house up in a few hours. Unfortunately their stock
price which was quite high, has roughly gone to zero because they haven’t been able to get that
product off the ground. But there’s real innovation out there in that sector. And I think with
due respect to your comment, the perverse impact of monetary policy, I gently push back on that you
suggest we fully support though the challenges of dealing with supply.
On macroprudential I’m sorry, I’m going to push back on both your questions. I disagree.
What I think APRA have done is that they have put apologies for the pompous language, an out of the
money option in the market, which is to say we’re going to tell you now that if credit grows to
a certain level that constraints may bite. Now someone in the press somewhere, maybe someone from the
AFR here said it was like an eight-foot man walking into a pub and I can’t remember the
punchline, to be honest, saying no. Oh, the punchline was no 8 foot men in the pub, please. Of
course there are no such things, so it’s irrelevant. It’s not quite right. Because what it
says to the banks is go ahead and lend now, it’s absolutely fine. But be aware we’ve made a
judgment that at some level of credit growth, and there’s history of this in Australia, as you
know, as there is in other countries, credit growth could get to a level where it in fact becomes
unsustainable and threatens stability, including the housing market rather than supports it. Now,
I’m not an expert in the overall set of macroprudential settings in Australia. I’m sure
you’ll school me later on that. But I actually think this particular thing is quite a good
example of smart design where it allows credit growth to continue. And let’s be honest, credit
growth has been pretty strong over the past year. It’s been part of the stuff, I would say that
policymakers may have missed slightly in terms of the strength of bank lending, predominantly to
businesses, to a lesser extent into the housing sector. And so while I am not going to defend every
element of a regulatory regime I don’t understand, that particular initiative, I think actually
is an example of taking into account the kind of challenge you make whilst also allowing banks to
lend whilst also taking seriously their need to maintain stability. I don’t suppose if you said
who loves RBA in the room and no one cheered who loves APRA in the room? And they’re never going
to.
Moderator
That’s a free kick, Andrew.
Questioner
I’ll try and keep it shorter. Over the last year it seems that we’ve been flip flopping a
bit on NAIRU, neutral rate, is it restrictive, is it not restrictive? Where is the running ceiling
for the economy? Do you think our economic models are actually up to the task now? And to the extent
that there is all of this uncertainty, how much pressure does that place on the RBA at times like
this where we are uncertain to get it right versus get it wrong and where are you erring? So that was
about three questions.
Andrew Hauser
It was. That’s right. You didn’t really meet the test.
Moderator
Very succinct though, I think.
Andrew Hauser
Well, point number one is the RBA central banks in general, but the RBA in particular are fully paid
out members of the Sceptical about Macro Models club. Okay. So I wouldn’t and I hope we
don’t fall into this trap. If we do, we should put it right. I wouldn’t want you to take
away, you’re an expert on this, the idea that our forecasts are we run a model and we write it
down. We take models seriously because they help us understand the historical relationships. And so
it’s interesting when you mention the NAIRU, right, because our models were throughout last year
saying that the NAIRU might be quite high and we, a number of us talked about this idea of testing
whether that hypothesis was right or not. And for a period we saw unemployment dipping slightly or
staying low and inflation coming back gently to target. Obviously more recently we have not seen
that. And actually the irony of that is slightly again, I’m sorry I’m more of a
controversialist than perhaps I should be in the central banking community. But the irony of that is
it slightly pushes against the premise of your question, which is, as well as treating models with
the appropriate amount of disrespect, we should also treat them with some respect because some of
those models may have been telling us something at the margin about it. You call it flip flop, if I
may. I was told you should never repeat words like that. Becomes a snap. But I mean, the reason
policy turned around in February is because the first facts changed. And there are three key facts
that change. The first was the world. And I don’t think anyone thought that we would be sitting
here in early ‘26 with the global economy powering ahead. Did you see the Taiwanese export
statistics, GDP statistics today? Stunning. Because they are producing chips and servers hand over
fist into this AI and tech boom.
We trade with these countries and they demand our goods. That’s good news for us. No one
expected that. We certainly didn’t. I’ll hold my hand up to that, but I think I’m in
good company, possibly including you. The second is our stance of policy, which isn’t just our
cash rate, it’s also the credit growth that we were just talking about. It’s also the
exceptionally low risk premium in international markets, all of which act to boost demand. And
possibly, hands up, we underestimated the extent to which those financial conditions might imply a
somewhat less restrictive path for policy than we thought. And the third thing is the surge in
private demand relative to supply. In fact, we, and I particularly was expecting that pickup to
happen earlier and it didn’t. And our models, again, our models kept saying private demand
should be stronger. And there were, you know, poor confidence issues and tone and Trump and all the
rest of it were maybe holding things back that models struggle to take seriously. Again, the models
were right. They were just right at the wrong time. So I think models are an input. They’re an
important input. We treat them sceptically, but we don’t ignore them. And actually one of the
lessons I take from the past year is that ignoring them completely might be a bit of a mistake. But
uncertainty is with us. I grew up in the 70s. I know I don’t look that old, but I do and I
sometimes look a bit askance at this idea that uncertainty today is actually spectacularly higher
than in the 70s when the IRA was blowing up London, in the UK when there were more wars than you
could eat your breakfast off, et cetera, et cetera. Uncertainty has always been with us and it’s
a challenge, but it’s one that we take in our stride.
Moderator
Very good, thanks, Andrew. If you had time for a couple more questions.
Andrew Hauser
Yeah, long questions, long answers.
Moderator
And one over here?
Andrew Hauser
If
questioner
asks a question about our 2027 Q3 forecast, am I allowed to not
answer it?
Questioner
I’m not going to ask that in this, in this audience. I actually wanted to come back to something
that you raised which was around the strength of credit growth. And, and I think it’s a fair
comment to say that economists generally, not just the Reserve Bank’s, perhaps miss some of the
signals from the broader part of the economy. So we know that credit growth is running strong.
We’ve obviously started or hiked rates. When you look at broader financial conditions. And we
have seen an increased amount of referencing to broader financial conditions from RBA communications,
we did a bit of a count on that. So I guess my question is we’ve seen, when we measure it, and
our financial conditions index looks pretty similar to yours. We have seen some tightening in
financial conditions since November. When we look at what’s driven that, though, it’s all
been driven by the components that are related to rate hike expectations. Everything else inside our
FCI, those broader measures, whether it’s house prices, credit growth, those are still sitting
in expansionary territory or sort of close to neutral. So I guess I’m interested in, how do you
think that resolves itself? Is it the case that we have to keep rate hike expectations until those
broader measures tighten up, or is there another path to sustainable tightening of financial
conditions?
Andrew Hauser
If you ever stop being an economist, I think you’d be a very good used car salesman because you
may have noticed that she’s pitched her product to all of you. So those few of you who
aren’t clients already will know that they have a new financial conditions index, which
you’ve just heard quite a lot about actually. So have you got the exchange rate in there?
Questioner
Have we got what sorry?
Andrew Hauser
Have you got the exchange rate in your index? Because of course that is appreciated and the number of
colleagues in the room who are exporting will probably be conscious of that or will be conscious of
that, that has tightened financial conditions. So I assume it’s not just the pickup in the curve
that’s done that, but also the exchange rate. But you’re right that if you look at some of
those other measures they remain on the accommodative side. Many of them are functions of things that
we, well, they’re all functions of things actually that we don’t directly control. Part of
it, if you believe in the normal transmission mechanism would be the higher cash rate in due course
should feed through into some of those things. We were talking about our colleagues concern here
earlier that we’re going to kill the housing market. I don’t think we are but you know we
will obviously alert to the possibility of a sharper slowdown there so there’ll be some pass
through in time. But some of these things are driven by this very buoyant global economy and we have
to take that into account. And you know, I just want to come back to this point because there seems
to have been some debate about it. Inflation is too high and we will do what it takes to bring it
back down. We’re not doing that because we’re inflation nutters as Mervyn King once called
central bankers or because we’re somehow out to help the interests of the banks or some other
special group. It’s being done because we know the pain that that causes households and all of
you in the room when inflation is too high and out of control and I’m very conscious people
sometimes say do you feel under pressure politically or otherwise? The pressure we are under is to
get inflation back to target. And if things like the kind of thing you mentioned flash red on the
upside, that will be part of our assessment, I can assure you.
Moderator
Okay, thanks, we’ll keep going. We’ll just see how we’re going for time after that.
Speaker 5
Okay, well thank you to the two Andrews, it’s been outstanding and Andrew, thank you very much.
No, this one, the English one, it’s great to have somebody from our mother country who has
embraced Australia, its economy and its social system so carefully and well and I think that’s
been a wonderful addition to the team at the RBA.
Andrew Hauser
My dad, ladies and gentlemen.
Speaker 5
What I appreciated today, you honour the RBA or the central-backed rule of staying within the rails
and setting interest rates and things like that based entirely on the current situation in the
economy and the policies that the government are following. So you don’t seek to become part of
another element in sort of management of the government or anything like that. You keep within your
rails. And I think that actually makes you far more reliable and far more trustworthy, I think, to
the general population, certainly to the business population. So thank you very much, keep up the
great work. Now, the next question may be a little bit risky. Is there another country in the world
that’s got a better economic policy and outlook than Australia?
Moderator
An easy one.
Andrew Hauser
I don’t think normative comparisons of economic policies are probably very productive, if I take
a few examples. The US is a fascinating example, right, where you may say that. And let’s be
clear, public policy, fiscal policy is for governments. Governments are elected and unelected by the
public, and that is the system by which those judgments should get made. And that’s why I think
it is quite difficult to compare other countries. But what you’ve seen in the US is a very clear
attempt to change the policy framework. As I say, could I agree with it, you may disagree with it,
but it’s very dramatic. Right alongside that you’ve had this absolutely extraordinary
technology and AI boom, which some people think is a mirage and some people think is extraordinary.
And of course, like most of these things, it’ll be somewhere in between. Anyone that’s used
AI know it’s absolutely terrible at some things and quite spectacularly good at others. And so
the very fact that these two things have coincided, I’ve been talking to people, is it causally
linked somehow? I can’t work out how. I think it’s pure chance. But it is an extraordinary
combination of things and has led to this complete counterfactual that we’ve all had to deal
with, all of us who are forecasting, about everyone thinking the world was going to go to hell in a
handbasket in ‘25, possible recession, possible crisis. And in fact it surged forward, not off
the back of those policy decisions, which you can agree or disagree with, but off the back of this
quite separate productivity, I’m not going to say miracle, but boom on the back of tech. And
that’s been extraordinary. Now, is that the result of policy, proactive policy or policy
neglect? I don’t know. I come from a country that’s made a major trade decision itself some
years ago, which seemed to have no impact at the time. But 10 years on, you only have to look at
the news about the UK and its political and economic challenges to see that there clearly were
consequences for that.
So I think when you think about the tariff impact of the US tariffs and whether are they going to have
effect over some period, they may well do over five or ten years, even if they don’t, over the
period ahead. Take China, which is obviously our major, single biggest trading partner. Its policy
stance is fascinating. It has to deliver for the purpose of its political credibility, this growth
target. There’s a big debate going on in China at the moment about whether it’s four and a
half, four, three quarters or five, but it’s not going to be one and it’s not going to be
two like our number. And so you really do see a very, very wide variety of different kinds of policy
choices here. Responding to the challenge. I do think it’s always dangerous for central bankers
to take any credit. Mission accomplished. Remember the George Bush thing on the boat and how bad that
now looks to take credit? But the Australian economy isn’t doing too badly at the moment. What
we do need to do is re-launch those animal spirits. That growth sensibility that I talked about at
the beginning, I think you’re all talking about. It has the institutional strength, it has the
flexibility and it has the know how to really actually navigate this complicated future world. The
question about uncertainty. One of the interesting things I think about Australian history and I have
looked at this a bit, is that Australia has often done best out of terrific adversity, whether
domestically or whether internationally. And that’s because of its combination of great merits.
And so I, you know, I think you can score yourselves. I won’t take it on me. I think you can
score yourselves okay. And with a following wind on this productivity challenge, I think there’s
real opportunity.
Moderator
Very good. I’m going to have time for just one more question. Unfortunately, if we kept going,
we could be going to afternoon tea and dinner time. But one last question over here. Thank you.
David Chau
So, Deputy Governor David Chow from ABC News. I’ll be trying to be quite succinct with this one.
So apart from Japan, Australia is the only other major economy to start lifting interest rates
recently. So what makes Australian rates and the inflation situation here so different to other
economies like the UK, Europe and the USA? And also, do you have any thoughts on the level of
government spending here and its contribution to inflation relative to those other countries?
Andrew Hauser
Give the man a prize.
Moderator
Somebody had to get it in.
Andrew Hauser
Well, someone’s editor has told someone that. You bloody well better ask that question. Shall I
go long on the first question? I think this question. Second one as well, please. Yeah, yeah. Okay.
In your dreams. To the first question. Let me take you back to medieval times. I don’t know how
long we’ve got. I think it’s an interesting point. So I was talking to some major investors
yesterday and they were very much saying, look, know Australia stands out for its position in the
cycle. And let’s remember we had a different policy strategy to many other countries. We
didn’t raise interest rates as far up during the COVID inflation boom and that meant we were
slower to bring them down as well. A consequence of that, I think it’s fair to say, and we were
talking earlier about uncertainty over output gaps is that this economy is clearly closer to balance
than many of the other economies that you might have in mind. So New Zealand is obviously very close,
had a big negative output gap opening up, economy slowed sharply, went into recession. Canada has
obviously had its own massive challenges with the U.S. Europe has its own structural growth
challenges. So most of those other countries are nowhere near as close to balance as the Australian
economy. And I talked about this in the Melbourne Cup speech. It’s in a way the backside of that
success of keeping the economy close to balance, that even relatively small demand shocks of the kind
we had last year can lift inflation a bit and cause policy to need to respond. Now, we don’t
know whether this pickup in inflation is going to be wholly temporary, wholly permanent, somewhere in
between. That’s the big debate amongst all of the economists in the room and us at the moment.
And we’ll, we’ll look at the data and we’ll take our view, but I think it’s fair
to say that it’s a consequence of that. I’d say hubris is a dangerous thing, but relative
success of holding the economy close to balance, that we are now facing into the inflationary
challenges of that pickup in demand that we’re seeing globally a little bit earlier than others.
We clearly also have learned things about the domestic economy as well. But let’s see, are we
the first mover in a number of countries beginning to tighten policy over the next year or two, or
are we a complete idiosyncratic case with its own domestic issues and nothing of the kind? I think
that’s a really interesting question and I’m not sure which way it goes. What was your
question the second one again?
David Chau
Yeah, look, I’m interested in your thoughts on, you know, the government’s level of
spending, its contribution to inflation relative to those other countries of lower and steady rates.
Andrew Hauser
Look, I said it already and I’ll say it again. Commenting on the political choices of a
government is not for a central bank. There’s been a lot of criticism at the central bank in the
last week or two of not speaking up. But I was taught very clearly that we have a job to do with
inflation and we have to keep employment close to full employment. And as I said at the beginning,
and I’ll say again, we’re going to take that statutory duty very, very seriously.
We’re an equal opportunity monetary policymaker. A dollar of demand that comes from the public
sector, a dollar of demand that comes from the private sector should be counted exactly the same in
terms of its impact on inflation. The composition of total demand is for the government to determine
and the public will determine whether they agree or disagree with that in the normal way. Australia
has an extremely robust electoral system. And I think it’s interesting when people sometimes say
the central bank should come in and support their view against the government, you should be
attacking them. I always think it’s worth asking them, what if we were coming in and taking the
opposite view to you? Unelected officials, some of them from other countries, making a comment about
the decisions of a publicly elected government. There are circumstances where the debt position, for
example, of a country is so out of hand that it can directly threaten monetary stability. I lived
through the LDI period in the UK, as I think you probably know, when confidence was lost from
international investors in the UK for a period, and that directly threatened monetary stability. At
that point, we had no choice given at the Bank of England, never allowed to call we anymore, they had
no choice at the Bank of England to intervene to maintain monetary and financial stability. But
outside those extreme events, if you ever see a technocrat like me walking into the public arena and
saying, do you know what? I think you could do this better. Who the hell are you to actually make
that comment? That is the mindset that I was brought up in as a central banker. I was also brought up
to learn that if you’re supposed to be targeting something that’s two and a half and
inflation is actually 3.4, you probably should get back to your day job. And that’s what
we’ll be doing.
Moderator
Well navigated, Andrew. On that note, my sincere apologies to those who had questions, but we’ve
run out of time, so I’m going to have to call time on it.