Bullock Sets Record Straight: Interest Rates Don't Drive Inflation

RBA Governor Michele Bullock addressed the Committee for Economic Development of Australia (CEDA) on Tuesday, clarifying that higher interest rates do not directly cause inflation. She emphasized that people often confuse their cost of living with inflation, which is actually about price increases in the economy.

Bullock pointed out that as interest rates rise, mortgage holders see an increase in their costs, but this is different from inflation, which is driven by rising prices across the economy.

Regarding Labor's housing tax changes, Bullock noted a significant drop in housing approvals for investors since the introduction of these policies. However, she also stated that house prices have surged since the beginning of Covid and are now correcting from a 'very high base.'