Reserve Bank of Australia

• In recent times, we’ve seen plenty of big news stories emerge from senate inquiries and estimates hearings.
• Estimates hearings have, if anything, been even more sensational.
• Earlier in the year, former Reserve Bank of Australia governor Philip Lowe copped a grilling over inflation and rising rents.

The history of senates

• This is because senates and “upper houses” in parliamentary systems have traditionally been dominated by older representatives of the establishment.
• Traditionalists were recently scandalised by the idea of relaxing the dress code to allow hoodies in the chamber.
• This is why senates and other “upper houses” around the world typically have the power to review and amend legislation passed by their colleagues in the “lower house”.

The importance of committees

Even when it is not debating bills in the chamber, the Australian senate continues to play this role in our democracy by scrutinising government business in its committees. These committees conduct their own hearings, investigations and inquiries. Broadly speaking, and with some exceptions, there are three types of senate committee:
standing committees, which serve for the full length of the parliament
select committees, which serve for shorter periods and investigate specific issues
joint committees, which have members from both the senate and the House of Representatives.
There are eight standing committees in the Australian Senate. Each covers different broad areas of policy (like economics or education), and conducts estimates hearings in its area.

So what are senate estimates?

• According to senate standing orders, estimates hearings are committee proceedings in which senators may “ask for explanations from ministers in the senate, or officers, relating to items of proposed expenditure”.
• After the budget is handed down in May, senior officials and ministers must front up to standing committees to answer questions about estimates (hence the name) of their expenditure for the coming year.
• But they’re just as likely to be squabbles between opposing politicians (who could forget this testy exchange, for example).

What about senate inquiries?

• The other thing to know about senate inquiries is that while they’re not always high profile, there are a lot of them.
• The senate may only sit for 60-odd days a year, but this doesn’t mean senators get an easy ride.
• Read more:
  Question Time reforms are worthy but won't solve the problem of a broken political culture

  There are 52 senate inquiries happening right now.

• But if senate estimates and inquiries go the way of rowdy question time, the upper house’s ability to provide effective and diligent scrutiny will suffer.

Lachlan Johnson does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

• This observation arises within the context of ongoing discussions concerning the ramifications of interest rate adjustments for borrowers, with expectations of further increases on the horizon.
• The cash rate set by the Reserve Bank of Australia (RBA) has experienced a 400-basis-point rise since the commencement of rate adjustments.
• The surge in deposit rates, approximately 300 basis points, is consistent with historical trends observed during earlier phases of interest rate hikes.
• Notably, this rate transmission surpasses that observed in New Zealand and the United States, where banks have transmitted only 50% and 35% of the rate increases, respectively.

• If the Reserve Bank does push up interest rates again, the most likely next date is its next board meeting, on Melbourne Cup Tuesday.
• It’s uncertain about what’s happening to China’s economy; it’s uncertain about the lagged effect of the 12 increases to date; and it’s suddenly less certain about inflation.

Inflation has kicked back up

• In the US, annual inflation plummeted from a peak of 9.1% to 3% before edging back up to 3.7%.
• In Australia, the monthly measure of annual inflation dived from 8.4% to 4.9% before edging up to 5.2%.
• This means inflation is moving further away from, rather than closer to, the Reserve Bank’s 2-3% target band.
• The first thing to consider (and they considered it in the first meeting under Michele Bullock on Tuesday) is what’s caused the uptick in inflation.

Petrol is fuelling inflation

• Statistically, all of the uptick in inflation (yes, all of the uptick) was caused by an increase in one price – what the Bureau of Statistics calls automotive fuel, and what the rest of us call petrol and diesel.
• Had that price not soared an astounding 9.1% in one single month, August, the inflation rate for August would have remained steady at 4.9%.

Suddenly, petrol’s $2.20 per litre or more

• The result – bolstered by a much lower Australian dollar – has been soaring prices.
• We’ve even seen new records set in some places, including Brisbane’s record unleaded price of $2.38.
• In August, retail spending grew just 0.2%, at a time of rapid population growth and still rapid price growth.
• And here’s the thing about the latest increase in petrol prices: it will wind back spending on things other than petrol even further.

Petrol could be fuelling ‘disinflation’

• AMP chief economist Shane Oliver thinks the latest petrol price rises could be disinflationary.
• Offsetting this is the reality that petrol and diesel prices have risen.
• In time, those higher prices will feed through into higher prices for just about everything that is moved by trucks.

• SYDNEY, AUSTRALIA, Sept. 07, 2023 (GLOBE NEWSWIRE) -- STK Management ( https://www.stkcorp.com.au/ ), a leading advisory firm based in Sydney, has released the report on the "Insight into Australia's Unchanged 4.1% Interest Rate for the third consecutive month".
• "A review of our economy certainly paints a multifaceted picture," commented Mark Wallace, Chief Investment Officer at STK Management.
• "The intricacies of Australia's financial systems mean that any rate tweak has ripples throughout the economy," Wallace from STK Management added.
• At STK Management, we remain committed to guiding our clients through these fluctuations with informed, strategic advice."