Reserve Bank chief slammed for suggesting Aussies getting haircuts are to blame for inflation

The Reserve Bank's new governor Michele Bullock has been slammed for suggesting Australians getting haircuts are to blame for high inflation.

With inflation still high at 5.4 per cent, Ms Bullock said domestic demand for services was now the key driver of high prices.

'Inflation is being driven by domestic demand is that it is increasingly underpinned by services,' she told an Australian Business Economists dinner in Sydney on Wednesday.

'Hairdressers and dentists, dining out, sporting and other recreational activities  – the prices of all these services are rising strongly.'

Tony Windsor, a former independent member of federal Parliament, joked that bald men like himself were leading the fight against inflation.

'Breaking…Bald people to lead the fight against inflation,' he told his X followers on Thursday morning.

One follower joked those without much hair on top could avoid paying tax on their company car.

'Also a good way to avoid the fringe benefits tax,' he said.

Mr Windsor, who previously held the seat of New England in northern New South Wales, joked the banks could reward bald customers for doing their bit to keep inflation down.

'You will be entitled to lower mortgage rates,' he said.

Ms Bullock said high inflation was now a problem beyond surging petrol and electricity prices.

'So inflation is much broader than just rising prices for petrol, electricity and rents – prices are rising strongly for the majority of the goods and services we all consume,' she said.

The Reserve Bank of Australia this month raised interest rates for the 13th time in 18 months, taking the cash rate to a 12-year high of 4.35 per cent. 

Inflation is now expected to take longer to moderate, with the RBA forecasting a return to the top of the two to three per cent target in late 2025 instead of mid-2025, as predicted as recently as August.  

Spending on services, classified as recreation and culture, climbed by 5.6 per cent in the year to September, Australian Bureau of Statistics consumer price index data showed. 

Spending data from the Commonwealth Bank's 10million customer accounts backed up the RBA's observation, with both older baby boomers and younger millennials both forking out more on services.

Baby boomers, or those aged 65 and over, spent 17 per cent more on travel and 11 per cent more on eating out, as their overall spending rose by 6 per cent.

Millennials spent 13 per cent more on entertainment, even as their overall spending dived by 5.1 per cent, including a 3.7 per cent drop in everyday essentials.

Credit check company Experian has also revealed two-thirds of lending managers surveyed had already seen an increased risk of consumer defaults and hardship in the last six months.

Borrowers who took out a loan since 2019 are also three times more likely to default compared with someone who took out a mortgage in 2015.