Australian home borrowers are experiencing much, much more interest rate pain than borrowers in New Zealand, Canada, the UK or US – for one simple reason, writes Peter Martin.
If that happens, and if we escape a recession, the panel expects unemployment to climb only modestly over the year ahead while inflation glides down to 3.9 per cent — within spitting distance of the Reserve Bank's 2-3 per cent target.That path might mean accepting a slower glide down in inflation than some would like, or even a higher end point — something closer to 3 per cent than 2-3 per cent.
Nobel prize-winning economist Paul Krugman this week suggested quietly abandoning the US inflation target once inflation dropped to a point where peopleThere would be a case for doing that here, so long as inflation was stable, predictable and no longer causing alarm. It'd help keep unemployment low.
In any event, we're nowhere near there yet. The March quarter figure put the annual inflation rate atWhen we get there, Lowe or his successor will have time to think about how important ultra-low inflation of 2-3 per cent really is, and whether it is worth the cost to Australians of getting there. Peter Martin is visiting fellow at the Crawford School of Public Policy, Australian National University. This article originally appeared on
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