{"id":656821,"date":"2026-05-08T02:50:16","date_gmt":"2026-05-08T02:50:16","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/656821\/"},"modified":"2026-05-08T02:50:16","modified_gmt":"2026-05-08T02:50:16","slug":"michele-bullock-has-made-a-bold-move-and-its-not-the-rate-rise","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/656821\/","title":{"rendered":"Michele Bullock has made a bold move \u2013 and it\u2019s not the rate rise"},"content":{"rendered":"

May 8, 2026 \u2014 3:00am<\/p>\n

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Reserve Bank governor Michele Bullock is pretty good at holding a line. She can identify when journalists are trying \u2013 sometimes quite sneakily \u2013 to get her to give what\u2019s called \u201cforward guidance\u201d: a sense of what the next interest rate moves might be. And she very often sidesteps those questions with a knowing smile.<\/p>\n

This week, though, she did something a little unusual. Instead of putting on her poker face and batting away probing questions about future moves, she gave journalists \u2013 and the public \u2013 a bit more to work with.<\/p>\n

\"RBARBA governor Michele Bullock has pushed back against suggestions the bank is taking a \u201cwait and watch\u201d approach.Louie Douvis<\/p>\n

In fact, her press conference was interesting enough that her words visibly shifted where people were parking their money.<\/p>\n

Markets \u2013 largely made up of traders who shuffle money around and keep an eagle eye on anything that could affect their investments (such as interest rates) \u2013 had been betting on an interest rate hike, so there was little fanfare when the decision was announced to raise interest rates for the third consecutive time this year.<\/p>\n

But by the end of the press conference, the S&P\/ASX200 \u2013 a broad gauge of the Australian sharemarket \u2013 had climbed. Why? Because Bullock had played down how likely the bank might be to keep cranking interest rates.<\/p>\n

Related Article\"Treasurer<\/a><\/p>\n

Most traders become more optimistic about the growth prospects of Australia\u2019s companies (and invest more money in them) when interest rates look like they\u2019ll ease \u2013 or when they seem like they might not go up by as much as they thought. That\u2019s because lower interest rates lower borrowing costs for those companies and might lead to customers spending more rather than saving.<\/p>\n

So, what exactly did Bullock say to make traders more bullish? And does it mean borrowers can expect interest rates to come down soon?<\/p>\n

Bullock, early in the press conference on Tuesday, pushed back against the suggestion that the bank was in \u201cwait and watch\u201d mode after pushing interest rates to 4.35 per cent.<\/p>\n

\u201cWait and watch\u201d is a relatively easy position to defend, especially given uncertainty about things like how long wars overseas might last and the (ever present) uncertainty in predicting how human beings might behave.<\/p>\n

But \u201cwait and watch\u201d, Bullock said, was probably the wrong term.<\/p>\n

Instead, she explained that the Reserve Bank board \u2013 the nine people who decide which way to send interest rates \u2013 now felt the \u201cexcess demand\u201d they were trying to dampen in the Australian economy before the Iran war began, was no longer the main focus.<\/p>\n

\u201cWe needed to get demand to slow so that it was putting less pressure on inflation,\u201d she said. \u201cWe\u2019re now in a position where we\u2019ve got space to be alert to both sides of the risks.\u201d<\/p>\n

\"RBARBA governor Michele Bullock was more dour than usual about the downside risks to the economy at her latest press conference.Louie Douvis<\/p>\n

By that, she meant the bank could now turn its focus to balancing risk. Rather than being chiefly concerned about getting inflation under control, the bank is now just about equally worried about slowing the economy down too much in the process.<\/p>\n

Remember, interest rates work to slow down price rises by discouraging people from spending as much: when spending and demand for goods and services falls, especially relative to supply, so does the size of price increases. But when you put a brake on demand, you\u2019re also slowing down the economy. When you do that too much, you end up with low (or negative) economic growth and more people out of work.<\/p>\n

Bullock has never been completely dismissive of the negative effects of unemployment. But on Tuesday, she went to greater lengths than usual to explain why she worried about joblessness.<\/p>\n

\u201cHaving a job is just really important for people\u2019s self-worth, what they think about themselves, and their self-esteem,\u201d she said, flagging she was especially worried about vulnerable Australians and those with a mortgage.<\/p>\n

There was a clear sense, far beyond what the bank\u2019s written documents got across, that Bullock \u2013 and almost certainly her board \u2013 were worried about the prospect of a slowing economy and job losses.<\/p>\n

That\u2019s despite the very real possibility that the war in Iran \u2013 which Bullock made clear was a key factor in the latest rate rise \u2013 will be dragged out.<\/p>\n

Related Article\"As<\/a><\/p>\n

The war in Iran, which has contributed to a big spike in fuel prices across Australia (and the world), is pushing prices across the economy higher. But after pushing up interest rates again, the bank isn\u2019t too panicked about inflation.<\/p>\n

Part of that is because the bank, in its \u201cbase case\u201d forecasts (its guess of the situation and outcomes most likely to happen), assumes the oil supply issues contributing to higher prices will resolve within months.<\/p>\n

How did they come to this conclusion? Well, the bank looked to the very people who also closely monitor them: traders. In particular, they looked at how oil market traders were expecting Brent crude oil prices to move over the coming months. \u201cMarket pricing currently suggests that oil prices will soon start to decline from elevated levels, though they remain well above pre-conflict levels through 2026 and beyond,\u201d the bank said.<\/p>\n

Basically, they made an assumption, based on what traders think, that oil prices \u2013 and the cost of things linked to them such as transport \u2013 would drift back down. And since demand in the economy broadly has soured a bit, there doesn\u2019t seem to be as urgent a worry about inflation.<\/p>\n

If the bank were to continue hiking interest rates this year \u2013 as markets and most economists were expecting, especially before the press conference \u2013 headline inflation would be roughly back within the bank\u2019s target range of 2 to 3 per cent by the middle of next year.<\/p>\n

Related Article\"Australia\u2019s<\/a><\/p>\n

Meanwhile, although unemployment has remained historically low, coming in at 4.3 per cent most recently, the bank now expects it to rise steadily to 4.7 per cent over the next two years. That\u2019s tens of thousands more Australians being out of work.<\/p>\n

And annual economic growth will come in at just 1.3 per cent or 1.4 per cent from the end of this year to the middle of 2028. Accounting for population growth over that period, it\u2019s possible there\u2019ll be close to no growth (or even shrinkage) when we measure economic growth per person. That would mean our living standards barely budge, or even slip into reverse.<\/p>\n

It could be that after facing more than a dozen press conferences, Bullock has become less scared of stumbling over risky questions or being seen to provide \u201cwrong\u201d guidance (her predecessor, as you may remember, ended his term on a bit of a low after suggesting a path for interest rates which didn\u2019t end up playing out).<\/p>\n

But it\u2019s also likely that with economic growth crawling, some borrowers under considerable pressure and the bank\u2019s forecasts showing inflation rapidly falling over coming years, the prospect of job losses and the risk of a recession are simply looming large enough now to tip the scale against further rate hikes.<\/p>\n

While she hasn\u2019t ruled anything in or out, and the Iran war may yet change things, Bullock\u2019s stance \u2013 and greater consideration of the downside risks \u2013 is the right move.<\/p>\n

The Market Recap newsletter is a wrap of the day\u2019s trading. Get it each weekday afternoon<\/a>.<\/p>\n

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\"MillieMillie Muroi<\/a> is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra\u2019s Press Gallery and the banking writer based in Sydney.Connect via X<\/a> or email<\/a>.From our partners<\/p>\n","protected":false},"excerpt":{"rendered":"May 8, 2026 \u2014 3:00am Save You have reached your maximum number of saved items. Remove items from…\n","protected":false},"author":2,"featured_media":656822,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-656821","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/656821","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=656821"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/656821\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/656822"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=656821"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=656821"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=656821"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}