RBA Governor Michele Bullock front and centre at Senate estimates
Australian markets closed the week with modest losses as the Senate Estimates hearing put the spotlight on the Reserve Bank’s role in the country’s housing market and broader inflation dynamics. Governor Michele Bullock faced pointed questions about the central bank’s pandemic-era policy, its influence on housing prices, and the balance between supporting growth and keeping inflation in check. The session comes amid a housing market that has remained a focal point for both policymakers and investors.
What Bullock told the Senate about housing and policy transmission
During the hearing, Greens Senator Nick McKim pressed Bullock on whether the RBA’s quantitative easing and policy easing during the early pandemic contributed to a surge in house prices. Bullock rejected the premise that the RBA alone is responsible for housing price dynamics, arguing that the transmission mechanism runs through demand and supply conditions in the property market. She emphasised that while monetary policy does influence housing, the core issue is the persistent mismatch between supply and demand, exacerbated by supply constraints that cannot quickly respond to shifting demand.
Bullock also addressed concerns about the federal government’s expanded First Home Guarantee Scheme, acknowledging that it could lift prices in the margins by enabling borrowers with higher loan-to-value ratios to enter the market. She stressed that the government bears the ultimate risk as guarantor, and that the program represents a relatively small share of the market. Importantly, she cautioned that riskier lending, including higher LVRs and debt-to-income ratios, could surface as demand shifts, though the wider housing market remains the key driver of affordability pressures.
Implications for homeowners and borrowers
For borrowers, Bullock’s remarks suggested a nuanced risk landscape. The central bank remains vigilant on debt levels, and APRA’s prudential expectations are part of the broader framework that protects financial stability. In response to questions about potential costs for consumers if payment reforms advance—such as scrapping some card surcharges or lowering interchange fees—Bullock noted a price transfer possibility. If merchants pass on costs, households could see higher prices in other areas, even as the intended savings materialise elsewhere in the payments system.
ASX reaction and broader market snapshot
As the hearing dominated headlines, the Australian share market slipped modestly, with the S&P/ASX 200 Index easing 0.1% to 8,958.3 points. The session reflected a cautious tone as investors weighed gold and copper price movements, geopolitical developments, and the ongoing inflation narrative. Gold prices pressed near the $4,000 per ounce mark earlier in the week before easing slightly; copper and other mining-linked equities also contributed to a mixed risk mood on the floor.
In late trading, the Australian dollar hovered around 66 US cents, while commodity prices showed a split: iron ore rose while precious metals retraced some gains. The broader global backdrop—combining gold’s appeal as a hedge against inflation and the US dollar’s recent strength—shaped a temperate risk-off sentiment on local equities.
What this means for the outlook
The hearing underscored two enduring themes for the Australian economy: first, the central bank’s policy stance remains highly sensitive to domestic inflation pressures and the labour market, and second, the housing market’s supply constraints continue to shape affordability and credit risk. Bullock’s stance—grounded in the transmission mechanism of monetary policy but cautious about direct blame—signals a cautious approach to rate cuts ahead of clearer inflation progress. For investors, the message is to monitor housing supply indicators and any shifts in consumer credit conditions alongside ongoing central bank communication.
Wrap-up and takeaways
With the RBA at the centre of debates about policy impact and financial stability, investors and homeowners alike should stay attuned to the evolving balance between policy support and the discipline required to keep inflation on a sustainable path. The ASX’s slight retreat for the week reflects that ongoing vigilance, as market participants weigh domestic policy signals against global developments in commodities, currencies, and geopolitical risk.
