Financial markets, including Australian property and shares, have been pushing record highs for many months.<\/p>\n
Speaking at an Australian Business Economists gathering in Sydney, Reserve Bank governor Michele Bullock conceded she, and her overseas peers, were perplexed by ever-rising asset markets in the face of so many economic risks, including inflation.<\/p>\n
Ms Bullock told the Sydney gathering that her overseas counterparts were “flummoxed” by how “sanguine” or optimistic the financial markets had become.<\/p>\n
“Could it all end up very badly?” she questioned, pondering whether the financial markets could turn negative.<\/p>\n
“Some people are worried that might all end in tears,” she conceded.<\/p>\n
That is a reference to wide financial and economic dislocation that could hurt economies across the world.<\/p>\n
She said the RBA would need to pay attention to financial stability risks “if the markets take a big directional shift”.<\/p>\n
Asked by a reporter whether the RBA risked cutting interest rates amid an “AI bubble”, Bullock responded by saying the board did not focus on asset prices in its decision-making on monetary policy.<\/p>\n
However, she said if the financial markets did turn down in a dramatic way \u2014 without referencing the possibility of an AI bubble burst \u2014 and it hurt the economy, the RBA would consider cutting interest rates.<\/p>\n
Unemployment not too high<\/p>\n
This week sees the release of crucial data on the economy.<\/p>\n
This so-called fireside chat was a chance for the RBA governor to give business economists an insight into her thinking ahead of next week’s RBA interest rates decision.<\/p>\n
Financial risks ‘rising’ warns RBA<\/a><\/p>\n The Reserve Bank warns risks to the global financial system are “rising”, not receding, and Australia is not immune from any fallout.<\/p>\n Before that, the Australian Bureau of Statistics (ABS) will publish third-quarter inflation data on Wednesday.<\/p>\n