Australia news live updates: bombshell testimony in Barilaro inquiry; RBA chief says inflation has increased since march | Australia news

Amy Remeikis

Possible the RBA did ‘over insure’ the economy, Governor says

Also interesting in Phil Lowe’s speech was this little mea culpa about whether the RBA’s stimulus during the pandemic (the government bond buying program) has contributed to what Australians are experiencing now with inflation. In short, did the bank flush too much money into the economy?

Lowe says in hindsight, it’s possible the RBA did ‘over insure’ the economy. But he says it’s also important to remember the context of the times – how uncertain it was and just how “scary” the social, economic and health scarring was predicted to be.

And in that light, Lowe says the bank reacted to fulfil one of its core principles – to help ensure the welfare of the Australian people. But he also admits that yes, the bank has contributed to inflation:

In our case, we wanted to do what we could to provide insurance for Australians against the potentially catastrophic economic consequences of the pandemic. With the benefit of hindsight, it could be argued that we took out too much insurance. But that is the nature of insurance. If the event you were insuring against occurs, you are very glad you were fully insured. But if that event doesn’t occur, you are left questioning your decision and wondering whether you could have saved some money.

Understandably, judgements will differ as to whether we over-insured or not. But in the highly uncertain environment of the time, the right policy choice was to err on the side of too much insurance, rather than too little insurance. I recognise though that while this approach meant we avoided some damaging long-term scarring, it has contributed to the inflationary pressures we are now experiencing.

Amy Remeikis

How important is psychology in these economic times? Very.

Phil Lowe says the bank is watching that we don’t talk ourselves into a higher inflationary cycle.

(He’s worried that we all keep worrying prices will increase, which could see prices increase in itself because businesses put up prices thinking their competitors are doing it anyway and people expect to pay more. Then workers’ demand higher wages to cover the price rises and businesses increase prices again)

Lowe said:

As I indicated earlier, an important consideration is how inflation expectations and the general inflation psychology in the community evolve. If inflation expectations shift up and businesses and workers come to expect higher rates of inflation on an ongoing basis, it will be harder to return inflation to target – doing so would require higher interest rates and a sharper slowing in spending. It is in our collective interest that this does not happen.

Adeshola Ore

Victorian corruption watchdog says state’s integrity model is lagging behind

Robert Redlich said the report highlighted the weaknesses in the Victoria’s parliament’s integrity model, which lagged behind other jurisdictions in Australia:

Trust in our politicians is declining and will decline further if real action is not taken. Such action must be included in the clearest standard, reflected unambiguously in codes of conduct.

Deborah Glass said the case for reform now was “more compelling than ever”.

Redlich said he was confident Victoria’s parliament would give serious considerations to the reform. But he said cultural issues uncovered in the investigation were a matter for the Labor party:

How that is dealt with is a matter for the ALP … the culture of branch stacking is at least 70 years old … It’s a longstanding practice and the responsibility for that must lie with leadership.

Josh Butler

Anthony Albanese has stopped short of calling for Australians to work from home if they can, as chief medical officer Paul Kelly advised yesterday in the face of the rising Covid wave.

Yesterday Kelly said the Australian Health Protection Principal Committee of experts “called on employers to allow work from home if feasible”. The PM stopped short of endorsing that in a radio interview on Melbourne’s 3AW.

He encouraged people to stay home if they were sick. But, despite repeated questioning about the need for a “clear message” on how Australians should take Covid precautions, Albanese said every workplace was different:

It depends what your work is, of course. For many workplaces, they’ve adjusted to be able to work from home, and that’s becoming more and more something that I think is a permanent feature for some businesses … but for many people of course it is simply impossible to work from home due to the nature of their work.

Of course, many workers in frontline sectors including healthcare, hospitality and services can’t do their work remotely. But pressed on whether people should work from home if they can, Albanese again demurred:

It depends upon the workplace. Of course I don’t think there’s a prescriptive position that can be put forward but for many people, it’s convenient, they work in occupations whereby they can deliver for their business just as easily working from home … but I’ve got to get out and about, for example.

Kelly yesterday said that employers should review their occupational health and safety risks and mitigation plans, and “consider the feasibility of some employees working from home, wearing masks in the workplace and support employees to take leave when sick”.

Albanese will give a press conference in Melbourne shortly.

Amy Remeikis

Phil Lowe says the ‘neutral rate’ is 2.5%

If you’re following the economic news at the moment, you’re going to hear a lot about the “neutral rate”. At RBA deputy governor Michelle Bullock’s speech in Brisbane yesterday, economists were keen to get her views on the neutral rate and how that’s found.

The most basic explanation for the neutral rate (keep in mind I am not an economist or expert, like Peter Hannam or Grogs) is the interest rate which is neither stimulatory nor contractionary. It doesn’t cause any more spending or any less. It just is.

Lowe says the neutral rate is 2.5%.

Adeshola Ore

Press conference on Victorian Ibac report

The Victorian ombudsman Deborah Glass and the head of the state’s corruption watchdog Robert Redlich are holding a press conference in Melbourne about their investigation into allegations of the misuse of public funds and branch stacking in the Victorian Labor party.

The investigation found that two former Andrews government ministers breached parliamentary codes of conduct when they misused public funds to fuel a vast branch-stacking operation, but there was not enough proof they had committed criminal offences to recommend prosecution.

It found the blatant use of public resources in the moderate Labor faction was extraordinary and shocking. No evidence of potential misuse of public funds was discovered within other factions.

Redlich said the report criticises a legislative framework that provides few consequences for abusing public resources:

While we consider the conduct to be egregious, the difficulties in the state of that law are such that we cannot recommend prosecution.

The report tabled in Victorian parliament today made 21 recommendations, including that the government establish an independent parliamentary integrity commissioner, ban MPs from being able to employ family members in their electorate office, and create an offence that would make it unlawful for ministers to allow a person to perform party political work while employed in a publicly funded role.

Three children have died after a house fire in Port Hedland in Western Australia’s Pilbara region.

Police said the fire, on Anderson Street in Port Hedland, had been reported to emergency services about 4.45pm on Tuesday.

Once it was brought under control, firefighters found the bodies of the children inside the house.

Detectives remained at the scene on Tuesday evening. Specialist investigators from the major crime division and forensics will travel to Port Hedland to continue investigations.

There were 15,352 new cases in the last reporting period, and 63 people are in intensive care.

Amy Remeikis

RBA chief warns of danger of ‘self-reinforcing cycle’ of inflation

The RBA governor has told his Melbourne audience that returning inflation to between 2% and 3% is going to be a bit of a challenge.

Phil Lowe points to the global uncertainty – Russia’s invasion of Ukraine and the resulting fuel and oil crises and ongoing supply chain issues being chief among them. But he said domestically, there are also some challenges to overcome – such as household demand. Then there is human psychology and how we respond to rising prices (if you ever get a chance, behavioural economics is a fascinating school of thought well worth your time) and how’ll we’ll react to rising interest rates.

So it’s possible to dampen down inflation, Lowe says:

But the path ahead is a narrow one and it is clouded in uncertainty … We are also paying close attention to the general inflation psychology of households and firms. If people setting prices and wages were to believe that higher inflation will persist, they are more likely to push prices and wages up.

This could result in a self-reinforcing cycle: one in which higher inflation leads to firms being more willing to put their prices up and agree to larger wage claims, which then perpetuates the higher rate of inflation, and the cycle repeats itself.

This is what happened in the 1970s and it ended badly. There is little evidence of such a cycle at present and it is important that this remains the case. The RBA is committed to ensuring that the current period of higher inflation is only temporary and it will do what is necessary to bring inflation back to target. It will be harder to do this if the inflation psychology shifts.

The short version of that – we can very easily talk ourselves into higher inflation, simply by constantly talking about inflation.

No Victorian Labor MPs will be criminally charged despite an integrity investigation unearthing deliberate, extensive and unethical use of taxpayer resources.

The Independent Broad-based Anti-corruption Commission and the Victorian ombudsman have released their joint report into branch-stacking allegations:

Although the deliberate and extensive use of electorate officers and ministerial advisors for party-political purposes was unethical, and offends right-thinking people’s sense of propriety in the use of public funds, the conduct is not sufficiently clearly captured by any existing statutory provision or the common law offence of misconduct in public office.

The investigation was launched after allegations that the Labor moderate faction powerbroker Adem Somyurek handed over cash and used parliamentary employees to create fake branch members and amass political influence.

The practice is not illegal but is against Labor party rules.