Bullock Bolsters Rate Hike Expectations

Reserve Bank of Australia (RBA) governor Michele Bullock's final public remarks before next week's board meeting have strengthened expectations that interest rates will rise. In her speech at a Committee for Economic Development of Australia event in Sydney, Ms Bullock said the jobs market was 'a bit too tight' and adding pressure to wages, business costs, and inflation.

She stated that unemployment between 4.5 and 5 per cent would remove enough heat from the labour market to ease inflationary pressure. The RBA will be closely watching August's unemployment data, due out on Thursday, which will be the last major release before the meeting.

Bullock also emphasized the need to prevent imported inflation from the global energy price shock and keep inflation expectations anchored through monetary policy. This comes as CBA, Westpac, ANZ, and NAB all now expect a rate rise in September, with Bloomberg futures pricing suggesting a 90 per cent chance of an increase next week.

The RBA's governor also discussed the potential impact of artificial intelligence on productivity and inflationary pressure. While AI could eventually lift productivity and reduce inflation, it is currently adding to demand before supply-side gains have emerged.