Reserve Bank governor Michele Bullock has rejected suggestions she cautioned the federal government about its spending behaviour, amid media reporting that she had warned the treasurer to exercise restraint in the lead up to next year's election.

"I don't believe I've been cautioning anyone," she said.

Ms Bullock made her comments in a Senate hearing in Canberra on Thursday morning.

During the hearing, WA Liberal senator Dean Smith asked the governor to expand on some comments she had reportedly made during her post-RBA Board meeting press conference on Tuesday this week.

In the wake of Tuesday's RBA press conference, some media articles reported that Ms Bullock had delivered a warning over government spending to Treasurer Jim Chalmers.

"In recent days, you've expressed a note of caution to policymakers in regards to their spending appetites as they come to end-of-financial-year statements and election periods," Senator Smith said.

"Can you just elaborate for the committee what are some of those risks if policymakers don't exercise a more prudent approach to government spending?"

Ms Bullock took the opportunity to correct the record.

The government's attitude 'is the right one'

"What I've been observing is that the private sector in Australia at the moment is very weak, and the public sector demand has been filling that gap, so what we have is an economy which is not growing very quickly and the private sector's very weak and the public sector's providing some support," Ms Bullock said on Thursday.

"Our forecasts show that with that sort of mix, we end up with inflation coming back down to target in the next couple of years.

"Now, it's true that total demand is what is driving inflation, in terms of total demand versus total supply, so that's a mix of public and private [demand].

"I think the [federal and state] governments have been conscious of what they're doing, and certainly when I talk to the treasurer he is very conscious that they need to be cautious in terms of what they do, in terms of the budget.

"He knows that, he's told me this, that fiscal policy has to work with monetary policy."

Ms Bullock reminded Senator Smith that "fiscal policy" — which refers to a government's spending and taxing decisions — had to fulfil many roles in society.

She said there were certain services governments had to provide, for which it had to provision, and its policies had to work on behalf of voters and the economy as a whole, which meant working with the Reserve Bank to ensure inflation was kept in check.

"I think that the policymakers are being very conscious of what they're doing with they're spending," Ms Bullock told him.

"They're conscious that they've got to have fiscal policy working for the Australian people, but they're also conscious that they've got to use it in a way that doesn't exacerbate the inflation problem because frankly, the government knows, we know, as the Australian population knows, that inflation is the thing that's hurting everyone.

"And if we don't get inflation under control then it's worse for everyone," she said.

Trump's policies could lead to higher global interest rates, damage from tariffs

Christopher Kent, RBA assistant governor (financial markets), appeared alongside Ms Bullock in the Senate hearing on Thursday morning.

He was asked to explain how markets were reacting to the news of Donald Trump's victory in the US presidential election overnight, and what his election could mean for inflation and interest rates globally.

Dr Kent said markets were predicting ahead of the election that Trump may win, and with confirmation of his win overnight, they were moving further in ways you would anticipate, given what economic policies may be on the horizon.

"And because the US is such an important source of funding, and the demand by the US government for borrowing is substantial, that'll have upward effects on global interest rates.

"It's also pushing the US dollar up and other currencies down, but I would note other currencies have fallen by more than the Australian dollar in recent days, so on a trade-weighted basis, we aren't much changed in terms of our exchange rate," he said.

Dr Kent said trade tariffs were another prospect and they may have an "adverse effect" on Australia, in a roundabout way.

"We just don't know how big and who they'll be applied to," he said.

"By itself, though, those should push up the US dollar, because US customers will be buying [fewer] goods from the rest of the world, and they'll need less foreign exchange, but it means less demand by the US for global goods.

"So that's a sort of a negative for growth elsewhere. That's why European markets, for example, in terms of their equity prices, were down a little bit overnight, because US tariffs on European markets will be poor for their economy at the margin.

"And then finally, the big concern is large tariffs on China, which may have an adverse effect on us.

"But as I said, our equity markets have moved up a little bit in response initially, and the Aussie dollar has not much changed," he said.