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Posted: 2022-11-10 04:39:55

RBA deputy governor Michele Bullock has said the bank wants to hang on to as much of the employment gains made during the pandemic as it can, even as it tries to cool the economy to tame inflation.

Speaking at an Australian Business Economists dinner last night, Ms Bullock defended the bank's decision not to raise interest rates more sharply than it had, even though it is now not expecting inflation to fall back below the top of its 2-3 per cent target range until 2025.

"We're very committed to get it back down to target, but we have a flexible inflation target, and we have a flexible inflation target for a reason," she told the gathered audience of economists, many of whom work for the big banks.

"In many ways, the easy solution might best be have a scorched earth. And, yes, you could scorch the earth and get inflation back down very quickly. Is that the right thing to do?"

Her answer was a fairly unequivocal no, pointing towards the jobs gains made since the start of the pandemic that have resulted in the highest number of Australians employed on record and the lowest jobless rate in almost 50 years.

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