MNI BRIEF: RBA's Bullock Sees NAIRU At 4.6%

Reserve Bank of Australia has lifted its NAIRU estimate by around 10 basis points to 4.6%, Governor Michele Bullock told a Senate estimates hearing Thursday.

"Our models' estimate of NAIRU have risen a bit, but we don't take a model approach only, we also use a bit of judgment," she said, noting the most recent set of forecasts showed how the Bank considered full employment. 

Her comments follow the Board’s decision last week to raise the cash rate 25bp to 3.85% and updated forecasts showing higher inflation and weaker potential growth. (See MNI RBA WATCH: Bullock Says Policy Too Loose, Hikes 25BP)

Bullock said returning inflation to the 2.5% midpoint target may or may not require further hikes, adding that a stronger Australian dollar and higher interest rates will help dampen demand. Australia's unemployment rate tightened to 4.1% in December.