OPINION: We’ll inevitably become much more strident in pushing for wage rises if we lose faith in the Reserve Bank’s willingness, or ability, to tame inflation.
And that’s why Lowe needs to convince workers that he won’t hesitate to push further along the interest-rate precipice until inflation is conquered.
“The board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time,“ Lowe stated pointedly in Tuesday’s statement.As Lowe pointed out, despite the spurt in inflation we’re now seeing, “medium-term inflation expectations remain well anchored, and it is important that this remains the case”.If Lowe gets lucky, his path ahead will turn out to be less forbidding than it seems.
But after being caught off guard by the strong surge in inflation this year, Lowe is now taking the safe option. He won’t slacken his pace on rate rises until he is confident that overall wages growth remains moderate, and that workers aren’t pushing for big pay hikes to compensate for soaring prices.
writes on banking and finance, specialising in financial services, private equity and investment banking. Karen is based in Sydney.
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