In short:
RBA deputy governor Andrew Hauser says people are starting to lose faith in the RBA's ability to drag inflation down.
asserted
people → say → inflation
He says trust impacts inflation expectations of Australians.
asserted
trust → say → Australians
The RBA's Monetary Policy Board lifted interest rates to 4.85 per cent this week, their highest level in 18 years.
asserted
Board → lift → years
Reserve Bank deputy governor Andrew Hauser has acknowledged that Australians are losing confidence in the RBA's ability to bring inflation down as planned in the next 12 months.
asserted
Australians → acknowledge → months
He says a RBA survey has found that trust in the central bank's near-term ability to achieve its monetary policy objectives has "fallen materially" recently, even though overall trust in the RBA remains high and stable.
asserted
trust → say → RBA
He says the RBA does not want the public to lose trust in the RBA as an institution, but economic developments are putting that trust "to the test".
asserted
developments → say → test
"Not all the news is bad," he said.
asserted
he → say → ?
"And around the world, that's causing increasing anger.
asserted
that → cause → anger
And households rank inflation as their number one economic concern.
"
asserted
households → rank → concern
The cumulative increase in prices since COVID has far exceeded that in any other tightening period since inflation targeting began.
asserted
targeting → exceed → period
"A lower inflation rate doesn't undo that accumulated increase.
asserted
rate → undo → increase
And it's that increase, not just the latest rate of change, that seems to be part of what's driving public anger.
asserted
what → seem → anger
"What impact has this had on public trust in central banks?" he asked.
asserted
he → have → banks
Overall trust is high, but the edges are fraying
asserted
edges → fray → ?
Mr Hauser made his prepared comments when delivering the Sir Leslie Melville Lecture at the Australian National University on Thursday evening.
asserted
Hauser → make → evening
In his lecture, he said the RBA had been running a new Community Research Survey, which began in February last year.
asserted
which → say → February
The survey has now had four separate waves, drawn on feedback from 12,000 Australians, across all parts of the country.
asserted
survey → have → country
He said the survey showed that around 55 per cent of respondents have 'high' or 'moderately high' trust in the RBA.
asserted
cent → say → RBA
"That puts us in the upper part of the distribution of Australian public institutions," he said.
asserted
he → put → institutions
"Other central banks using comparable methodologies have similar scores.
"
asserted
banks → use → scores
That's a welcome, but frankly quite surprising result over a period in which interest rates rose, and inflation rose well above the target range.
asserted
inflation → rise → range
"Can this really be right?" he asked.
asserted
he → ask → ?
He said to answer that question, one has to look at how the more detailed survey responses have evolved.
asserted
responses → say → question
And that's where one will find some worrying news.
asserted
one → find → news
"Unsurprisingly, trust in our near-term ability to achieve our objectives, looking one year back and one year forward, has fallen materially," he said.
asserted
he → achieve → objectives
"Regression analysis finds these outcome measures play a statistically significant role in explaining respondents' overall trust.
asserted
measures → find → trust
"Australians understand our inflation mandate and hold us accountable when we fail to meet it," he said.
asserted
he → understand → it
In the graphic below, the final two blue rows show how Australians are losing faith in the RBA's ability to achieve its near-term inflation objectives.
asserted
Australians → show → objectives
Businesses also becoming less certain
Mr Hauser said trust played a very important role in the RBA's ability to manage Australians' inflation expectations.
asserted
trust → become → expectations
But he said according to Macquarie University's Business Outlook Scenario Survey (BOSS), more businesses were becoming less sure that the RBA's inflation target will be achieved over the next 5-10 years.
uncertain
target → say → years
"Some contacts in the RBA's liaison program say similar things," he said.
asserted
he → say → things
"Australia currently has no reliable measure of households' longer-term expectations, but their deep concern about inflation suggests they might feel somewhat similarly."
uncertain
they → have → inflation
He said that was why the RBA was determined to do what it had to do to get inflation down.
asserted
it → say → inflation
Just as we need it most, trust is under strain
On Tuesday this week, the RBA's Monetary Policy Board lifted interest rates to 4.85 per cent, their highest level in 18 years.
asserted
Board → need → years
Mr Hauser said it was imperative that the RBA maintained the trust of Australians in its ability to control inflation, especially now when the global economic situation was so fraught.
asserted
situation → say → inflation
"The decades following the 1980s were good times for central banks around the globe, as flexible inflation targeting delivered consistently low and stable inflation alongside rising real incomes," he said.
asserted
he → follow → incomes
"But more recently, and particularly since COVID, things have been rockier: persistent above-target inflation has marred that hard-won track record.
"
asserted
inflation → mar → record
The broader climate of trust towards public bodies has deteriorated.
asserted
climate → deteriorate → bodies
And we've entered a VUCA (Volatile, Uncertain, Complex and Ambiguous) world, amid a fusillade of shocks from tariffs, wars, geopolitical tensions, pandemics, and technological and environmental change.
asserted
we → enter → tariffs
"That means inflation is more likely to be pushed off target, economic forecasts are more likely to be wrong, and policy trade-offs get uglier.
asserted
offs → mean → target
…and 1 more, not listed.
The Aporia
