Reserve Bank Deputy Governor Andrew Hauser: Australians are 'furious' about inflation

Reserve Bank Deputy Governor Andrew Hauser has acknowledged that Australians are "furious" about inflation, but has indicated that the central bank is not yet at a point where it needs to take drastic action.

Mr Hauser said that inflation was the major problem for Australia's central bank, as he acknowledged Australians were struggling with the continued high cost of living and rising interest rates.

Inflation a 'lasting and pervasive issue'

"People are furious about inflation," he said, calling it the RBA's "one big problem". "I understand why. It's unfair. It hits people on low incomes, it damages price signals, it makes the job of companies difficult."

"What [people] want us to do is our job and bring inflation down. Everywhere I go, I hear cost, cost, cost, inflation, inflation, inflation, and that's our responsibility. We have to put that right."

Mr Hauser said that when people go to the supermarket every week, they see the price of goods rising and compare them to where they were a few years ago, leading to frustration.

"That is a very lasting and pervasive issue that is a function of the pick-up in inflation after COVID and will take years for us to fully resolve," he said.

Interest rates may rise higher

Mr Hauser indicated that interest rates could rise higher in the coming months, but denied that a rate hike was "inevitable".

"We could raise interest rates sharply [and] we could do it tomorrow," he said. "We could decide, 'You know what? We no longer take seriously the full employment part of our objective. We're going to bring inflation down come hell or high water.'"

However, Mr Hauser said that Australia was not at that point just yet, but gave a strong indication that the central bank was contemplating hiking interest rates as the economy continued to grow — albeit slowly — and the labour market remained tight.

Australia's four major banks are all forecasting the central bank will lift interest rates by 0.25 percentage points to 4.6 per cent by the end of the year.

Economic outlook and AI boom

Mr Hauser also discussed the current downturn in the housing market, saying the bank was watching it closely as the price adjustment would have an impact on consumption growth.

He expected prices to fall "a little bit more" but said current conditions in the housing market were not a key factor in the bank's forecasts.

Mr Hauser also expressed concerns about the global economic outlook, citing a recent trip to the US where he saw a productivity bonanza and an investment boom in artificial intelligence.

"Much of it may be a failure," he said. "Much of it may turn out to be a wrongful allocation of technology to tasks that won't actually solve its purpose, but there is an enormous vibrancy to that process."