People love to hate the RBA at the moment. Along with unnecessarily high energy and grocery bills, mortgage repayments are ruining our prosperity. There’s no reason for this other than the Albanese government spending other people’s money. Meanwhile, the RBA is the adult in the room.

So, I am surprised that many conservatives are jumping on the RBA-hating bandwagon. This is all Labor’s fault.

When Wayne Swan suddenly appears and starts telling everyone the RBA is ‘putting economic dogma over rational decision-making’, there is cause for scepticism. And when Ross Gittins is wheeled out a few days later talking about ‘price gouging’, you know that something is afoot on the left.

Labor is deflecting blame onto the RBA for the economic pain mortgage holders are currently experiencing through higher mortgage repayments.

But the RBA, under the leadership of RBA Governor Michele Bullock, is doing exactly what it was set up to do: to independently set monetary policy to keep inflation between 2 to 3 per cent.

To be sure, ‘setting monetary policy’ effectively means increasing the ‘cash rate’ (or policy interest rate) when inflation is too high – as it is now – or lowering interest rates when inflation is too low (or otherwise case of financial crises, referred to as ‘unconventional monetary policy’).

Interest rates are a blunt instrument. If your only tool is a hammer, then every problem can look like a nail. But like central banks in other countries, the application of monetary policy by the RBA is not as arbitrary as one might be led to believe by Treasurer Jim Chalmers, who recently accused the RBA of ‘smashing the economy’.

Much of the criticism toward the RBA was based on Michele Bullock warning that the cost of living is such that some people may need to ‘sell their homes’. But letting inflation go untamed will be worse for everyone in the long run.

Which brings us to the only other real tool in the RBA’s toolkit: ‘jawboning’.

Jawboning is US economic slang for:

‘…central banks… seek[ing] to persuade an entity to act in a certain way through rhetorical appeals, persuasion or implicit threats … to influence market and public sentiment.’

In effect, the RBA is telling consumers that things may get worse before they get better, signalling to consumers to stop spending. The RBA is also signalling to the government that fiscal policy, the government’s use of spending and taxation to influence the economy, is not helping to bring down inflation.

The system for the RBA’s conduct of monetary policy relies on National Accounts data produced independently by the Australian Bureau of Statistics. The current range of 2 to 3 per cent inflation was agreed upon by then Treasurer, Peter Costello, in 1996. The range has remained unchanged since that time and the RBA sets interest rates to stay within the target range.

Under the current situation, there is little to justify the RBA reducing interest rates while the government’s fiscal policy is doing everything it can to drive up inflation.

Unemployment is low, but that is because public sector employment, which contributes little to productivity, is up. If the unemployment rate increased, there would be a case for interest rate cuts.

Productivity is down, and with recent changes to industrial relations laws favouring generous working conditions, it is likely to get worse. Increased productivity can lead to lower prices for consumers and higher economic growth.

And while there has been some economic growth, that is only because of government spending. But wage rises accompanied by lower productivity all put pressure on the RBA to keep interest rates up.

Left-leaning thinktank the Australia Institute suggests that the RBA is wrong in not cutting interest rates because the economy is not ‘running hot’. It argues that government spending is driving the economy, whereas the private sector is suffering from interest rate rises. By this logic, inflation is not so bad and therefore the RBA should cut interest rates.

But almost everyone who has a mortgage, an electricity account, or buys groceries, knows they are worse off now than before the Albanese government was elected. By my own calculations, I would need an instant 13 per cent pay rise to return to the cash in hand I had left after paying food, shelter, and transport-related expenses pre-Albo.

Those on the minimum wage received a 3.75 per cent increase on July 1 this year, but that barely helps low-income workers catch up to the inflation rate. Of course, as I have argued before, many household grocery item prices have gone up far more than the headline inflation rate.

So, unless you are in one of the employee groups that received government-funded pay increases to the tune of 15 to 25 per cent, you only have to look at your household budget to know that things are worse since this government came to power. Or as John Humphreys argued recently, worse than any other time in the last 50 years except for a brief period during the 2008 global financial crisis.

But the Treasurer and Labor pundits are all blaming the RBA.

Former Treasurer Peter Costello has spoken out about the RBA’s 2-3 per cent inflation target which is actually set by government. Costello recently dared the Treasurer to lift the RBA’s target band for inflation rather than keep banging on about how the RBA is to blame for our economic woes. Chalmers could do this but then there could be no scapegoating.

Further, the major grocery stores have been partially blamed for the cost of living crisis and accused of ‘price gouging’.

Yet nobody on the left is suggesting Labor’s ideologically-driven energy crisis is to blame for anything.

It’s part of a socialist technique that’s called ‘changing the narrative’.

In the meantime, RBA Governor Michele Bullock is remaining independent and doing her job as best she can, with the tools she has available.

The Treasurer has changed the old adage, ‘it’s the economy, stupid’, to ‘it’s the politics, stupid’. And the RBA is the scapegoat.

Bullock knows that ‘our economy cannot thrive on lollipops and rainbows alone’. As much as interest rate rises may hurt us, the responsibility rests with the Treasurer. Don’t blame the RBA.

Even Sir Frederick William Pottinger would have seen these bushrangers coming.

Dr Michael de Percy @FlaneurPolitiq is a political scientist and political commentator. He is a Fellow of the Royal Society of Arts, a Chartered Fellow of the Chartered Institute of Logistics and Transport (CILTA), and a Member of the Royal Society of NSW. He is National Vice President of the Telecommunications Association, Chairman of the ACT and Southern NSW Chapter of CILTA, and a member of the Australian Nuclear Association. Michael is a graduate of the Royal Military College, Duntroon and was appointed to the College of Experts at the Australian Research Council in 2022.