The most important reserve bank governor for Australia?

Michelle Bullock, the new governor of the Reserve Bank of Australia (RBA), is shaping as one of Treasurer Jim Chalmer's best appointments, but one he may well be regretting. We should be grateful.

The RBA has decided to leave the cash rate where it is. This is the first decision made under changes recommended by the "Review of the Reserve Bank." Story continues below advertisement AD

Because of the review's recommendations, we are better informed of what the bank is thinking. It now puts out minutes of its meeting, and the governor of the bank also does a press conference. These are good innovations.

Reserve Bank meetings used to occur on the first Tuesday of the month, apart from January, making for 11 meetings.

Under the new rules, the bank will now meet every six weeks, making for eight meetings a year, and meetings will occur over two consecutive days, rather than being a one-day event.

I'm not sure why this would necessarily lead to better decisions, but in the case of the meeting just gone it hasn't impaired the bank's judgement.

It's certainly plain from the minutes and the press conference that the RBA intends to lean against federal government policy and that the interest rate relief the government appears to crave is not coming any time soon.

The bank warns that interest rates will not be falling until it is sure that prices are constrained and will fall into its target range of 2-3 percent. It expects this to happen by 2025.

At the same time, the governor also opined that rates would not be going back to 0.15 percent, which she says was an emergency reaction to the unprecedented pandemic.

In other words, rates may not have far to drop anyway.

The RBA is most concerned about inflation in services, and it assumes that wage increases are now restrained, and consistent with its inflation target. Story continues below advertisement AD

It also acknowledges that there are still some logistical challenges hanging over from the COVID period, as well as materialising as a result of more recent disruptions, such as the Houthi actions in the Red Sea.