Some think the bank’s handling a tricky situation the right way, while others say it’s putting ‘all our futures at risk’ and now’s the time to cut interest rates
Amid concerns over interest rates and inflation, ‘a greater focus on economic reforms in 2025, including to markets such as childcare and housing, will be important to lift economic growth without causing more inflationary pressures’.Amid concerns over interest rates and inflation, ‘a greater focus on economic reforms in 2025, including to markets such as childcare and housing, will be important to lift economic growth without causing more inflationary pressures’.
And while reforms that lift supply won’t do much in the short run to reduce inflation, they are important to lifting living standards in the long run. A greater focus on economic reforms in 2025, including to markets such as childcare and housing, will be important to lift economic growth without causing more inflationary pressures.
The RBA has one central tool to deal with inflation – interest rate policy. And that’s been very effective at squashing private sector demand, as the latest report card on the economy, the national accounts, shows. Indeed, some might say too successful, with GDP per person now falling in eight of the last nine quarters. It’s only population growth and government spending that’s kept the economy’s heart rate from failing altogether.
But there is ample evidence, notably from New Zealand and the UK, to suggest that the loss in productive capacity associated with slowdowns and recessions is permanent or very close to it. Until the 1980s, the New Zealand and Australian economies grew almost in parallel. But from the early 1990s onwards, while Australia has avoided recession for more than 30 years, New Zealand has had at least half a dozen.
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