Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

My question is to the Minister representing the Treasurer, Senator Gallagher. Last month, the RBA said that as much as three-quarters of the increase in inflation is a result of supply shocks, including corporate profiteering; that their models are not well suited to supply shocks; and that there is very little that monetary policy can do to offset supply shocks. We find ourselves today with the RBA responding to a problem it doesn't understand with a solution that doesn't suit. Minister, do you believe that the RBA smashing renters and mortgage holders with interest rate increases in response to inflation driven by supply-side shocks and corporate profiteering is the best economic policy that this country can muster?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | Link to this | Hansard source

ALLAGHER (—) (): I thank Senator McKim for the question and for his ongoing interest in the performance of the Reserve Bank. I think the bank has a very difficult job to do, and I think the government has a job to work hand in hand with monetary policy. I await the decision of the bank today, but I think the bank have explained that it's a narrow path they are following. They have a difficult job to do. They are independent of government. We have our review of the RBA. Obviously, it's not linked to the tightening cycle. We had announced that review—

Senator Duniam can chuckle, but it's looking at the broader issue that's raised about how fit for purpose the bank is and the fact that it hasn't been reviewed for a period of time—for some 30 years, I think. This review is timely, in the sense that we will get the three panellists' views on whether there need to be changes to any settings, the mandate et cetera. The government was aware of that; obviously it was an election commitment before the last campaign. I think that review will give us the best information available to check, or see how to make sure, that the RBA remains fit for purpose for the job that it has to do. Having said that, I am not linking that in any way to the tightening cycle. We do have an inflation problem in this country. The bank has a very clear mandate to ensure that inflation sits within the two to three per cent band and to ensure full employment. They are following their mandate, and they make their decisions independent of government.

Sue Lines (President) Share this | Link to this | Hansard source

Senator McKim, a first supplementary question.

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Minister, real wages declined at the fastest rate on record in December. The Treasury secretary said at Senate estimates that the risk of a wage price spiral remains low. Does your government believe that nine, going on 10, consecutive interest rate increases to avoid a non-existent wage price spiral is to the greatest advantage of the people of Australia?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | Link to this | Hansard source

I don't think the tightening cycle is being pursued in response to concerns about wages. The bank was clear, when those opposite were in government and the rate was sitting at about two per cent and not growing, that it was concerned at that point about wages. I think the comments they've made since, when wages started to lift, is that they would keep an eye on wages. Those are the general comments from the bank. But, again, I think, in terms of the job that they have to do, the risk of persistent high inflation is devastating. It's devastating on people on lower incomes, who will feel the hit from inflation harder than those, I would argue, who are on higher incomes. So let's not pretend there isn't an issue with inflation in this country. There is. We have to manage it, and we have to make sure— (Time expired)

Sue Lines (President) Share this | Link to this | Hansard source

Senator McKim, your second supplementary question?

Nick McKim (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Minister, banks, supermarkets and fossil fuel corporations are all booking mega profits. You said that the government needs to work with the RBA. So will your government introduce a corporate super profits tax to drive down inflation and fund cost-of-living relief for Australians who are being smashed by inflation, interest rate increases and the cost-of-living crisis?

Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | Link to this | Hansard source

It isn't the government's policy to introduce a tax as Senator McKim suggests. I give him credit for persistence in asking me that question, but my answer remains the same. However, the point you raised on cost of living is real. I think the challenge for those of us looking at the right way to respond and how we need to work hand in hand with the bank on the monetary policy side is: what meaningful difference can we make in a cost-of-living sense that doesn't have an inflationary impact? They are the decisions we've taken around our investment in skills, the National Reconstruction Fund and making investments in housing, cheaper child care and cheaper medicines. All of those are sensible investments. They do come with spending attached, but they are sensible investments which don't put upward pressure on inflation and assist people with costs of living. Energy cost relief is another area, and we'll continue to do that.