RBA Governor Michele Bullock has stated she has no regrets about delivering three interest rate cuts in 2025, even though the central bank reversed those cuts in 2026. Appearing before the Senate Economics Committee on Thursday, Ms Bullock faced questions from Nationals Leader Matt Canavan about whether the 0.75 percentage point reduction was a mistake.
“No, I don’t believe it was and I don’t believe the board thought it was,” Ms Bullock said. “Circumstances changed and when circumstances change, we have to change.” She noted that when the RBA was cutting rates in early 2025, inflation was within the target band of 2-3 per cent and unemployment was rising. “We were copping a lot of flak for not cutting quickly enough,” she added.
Ms Bullock explained that the inflation resurgence was driven by the economy’s capacity being smaller than anticipated, while concerns about Donald Trump’s tariffs proved overblown. Additionally, the artificial intelligence boom contributed to a rebound in global economic activity, reversing the earlier slowdown.
Housing Investment to Decline Due to Labor’s Tax Changes, RBA Predicts
The RBA expects housing investor demand to fall as a result of Labor’s planned changes to capital gains tax and negative gearing. Assistant Governor Sarah Hunter said there are already signs that the proposed rollback of negative gearing and the scrapping of the capital gains tax discount are weighing on demand for established homes.
“What we can say is what we hear from some of the banks and other contacts that we talk to is that the tax changes do seem to be having some impact in the established dwellings market,” Ms Hunter said. “That’s not unexpected.”
Ms Bullock also stressed that there will be a slump in housing demand from investors. “When we’ve done work on this in the past, we thought it would impact investor demand,” she said. “It might mean that there’s a bit of a change in the mix of housing between investors and owner-occupiers. What it does eventually in the long run? I don’t think we necessarily know. It’s a bit uncertain.”
Treasury Secretary Unable to Confirm Tax Changes Will Boost Productivity
Treasury Secretary Jenny Wilkinson was unable to confirm whether Labor’s tax changes will boost productivity, which measures GDP against the number of hours worked. This came after the Australian Bureau of Statistics revealed that productivity declined 0.6 per cent in the March quarter.
Nationals Leader Matt Canavan pressed Ms Wilkinson on the specific tax changes aimed at housing affordability. “The changes to negative gearing, capital gains tax and trusts, do any of those tax changes increase productivity?” he asked.
Ms Wilkinson said that changing the capital gains tax system “delivers a more accurate adjustment” and helps limit the impact that tax settings have on investment choices. When pressed further, she stated that the tax reforms “should help Australia move towards the long-run productivity assumptions that we have in the medium-term forecast.” Mr Canavan replied, “It doesn’t give me a lot of confidence.”
Massive Clash Over Labor’s Housing Shortfall
Finance Minister Katy Gallagher clashed with Liberal Senator Andrew Bragg over housing as Labor falls behind its ambitious home building target. Mr Bragg questioned whether Labor’s hefty spending on housing was worth it, citing that the average number of houses built has fallen since the Albanese government was elected.
“Between 2013 and 2022 the nation was able to supply 200,000 houses on average over that period,” Mr Bragg said. “Since you’ve come to office, you’ve collapsed that down by 30,000 and now we get 170,000 on average under four years of your government. You’re spending more money and we’re getting fewer houses actually delivered.”
Ms Gallagher said Labor was delivering “thousands more” than the Coalition did when in government, prompting a quick rebuttal from Mr Bragg. “I just gave you the ABS figures,” he said. After a miscommunication about government housing, Ms Gallagher attacked the Senator. “I know you don’t care about people who might require social and affordable housing,” she said.
Greens Question Treasurer’s Power to Walk Back Tax Reforms
Greens economics spokesperson Nick McKim questioned why Treasurer Jim Chalmers is being granted powers to change the tax reforms after they pass parliament. “If you are serious about your reforms, why have you created a power in this legislation to allow your reforms to be walked back in the future,” Mr McKim asked Ms Gallagher.
Ms Gallagher replied that it is not unusual to have ministerial powers with disallowance attached to deal with particular situations. She said the powers were “useful” particularly when there was oversight by parliament. Mr McKim repeated his question, and Ms Gallagher stressed that she had answered it, adding that the government is serious about generational reform to the housing market.
