RBA economist tells inquiry household wealth is growing

ABC NEWS (Australia)

The cost-of-living crisis has been weighing on millions of households for some time now and it's not letting up. The RBA's chief economist has been giving evidence at a parliamentary select committee on this as well as the state of inflation.

Transcript

00:00Very simply, the Chief Economist of the Reserve Bank is saying demand in the economy is still

00:07too strong.

00:08And what she's saying is that there's a weighting that the RBA has to do.

00:14So there is a limited amount of demand that the economy can take, and at the moment that

00:20demand is exceeding that limit.

00:23And you might think, well, there are millions of struggling households out there, so how

00:26can that be true?

00:27But this is an economic equation that is taking in an aggregate amount of demand, and it's

00:33an economic equation that is looking at really the fact that there are wealthier households

00:39out there that are able to spend, and that's what they're doing.

00:42But crucially, that demand exceeding supply, if you like, is adding to inflation.

00:49And it's why inflation is sort of coming down so slowly and so stuck at sort of 3.8%, 3.9%,

00:56well above the Reserve Bank's target band of 2% to 3%.

01:01And crucially, she said at this Senate committee that households are getting extra cash in

01:08their pockets to be able to contribute to that demand.

01:12And of course, the government has given them that cash in the form of energy rebates, and

01:18in some cases, because it's already kicked off from the 1st of July, the Stage 3 tax

01:22cuts.

01:23So the RBA is effectively saying households have more money in their pockets, they're

01:27contributing to the economy, they're spending on goods and services, and it's adding to

01:32demand and inflation.

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