ANALYSIS: Did the RBA get its interest rate strategy all wrong?
"The focus on wages as a major cause of inflation suggests the RBA does not have the correct analytical framework.""It's absolutely right to say that some of these globally sourced inflation pressures were becoming pretty evident by about this time last year and the Reserve Bank didn't give enough weight to them at the time or for many months afterwards."
"The RBA's inflation models essentially assumed that higher wages growth and a very tight labour market was an essential ingredient to deliver higher inflation," he says. "They did not account for the massive fiscal stimulus that generated a surge in demand, particularly for goods."But the inflationary pulse had accelerated prior to the war largely because of a surge in demand for goods.
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