RBA governor says bank was too late to hike interest rates

However, on Friday, Bullock repeated the RBA’s position that further rate cuts would only come into play if there were more progress on inflation, and that it would be keeping a close eye on the unexpectedly strong labour market as a potential sign of continuing price pressures.

While Bullock refused to answer a question at her press conference earlier in the week about the impact of government policies on the board’s calculations, on Friday she said the budget surpluses banked by the Albanese government in its first two years had been helpful in dampening inflation.

“It was helpful that there were those surpluses there because, at the time, the pressure on the economy, the pressure on the supply side of the economy from the massive increase in demand, was evident in inflation,” she said.

The government is now forecasting a deficit of $26.9 billion for the current financial year.

Asked about the future of cash, Bullock gave notes and coins a 10-year prognosis, labelling the decline in physical currency “inevitable” and saying nothing would turn around the race towards digital payments.

“Cash is going to be around probably for another 10 years,” she said, noting both customers and businesses found electronic payments much more efficient, and that the cost of handling cash – including theft costs – were higher than accepting card payments.

“It’s costly in terms of all the back office costs, counting it, taking it to the bank, particularly if you haven’t got a branch anywhere near you,” she said.

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Cash usage in Australia has plunged from 70 per cent in 2007 to 13 per cent in 2022, expedited by the pandemic.

In June last year, Armaguard received $50 million of funding from the big banks, retail giants and Australia Post to shore up the distribution of banknotes and coins. However, the funding runs out in June.

While the government last year pledged to force businesses to accept cash when selling essential items, Bullock said the cost of distributing cash would ultimately have to be footed through some form of subsidy, and that longer-term thinking was required to move to a new system.

“The bottom line of cash distribution is … if you don’t want the consumers to pay, then someone has to pay,” she said. “I think the idea that people pay to use cash would not go down well. So that means that in order to make this particular situation viable, someone is going to have to cross-subsidise consumers using cash.”

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