RBA interview
A clear and interesting interview from the RBA Governor, given to the ABC last night.
As the Governor points out, although there's been plenty of criticism of policy there is also a lot of hindsight bias at play.
In 2020, Australia was facing an Armageddon scenario with the prospects of tens of thousands of virus deaths, 15 per cent unemployment, and inflation expectations were in the gutter.
Now we have record high employment, the unemployment rate is now at 50-year lows, and it seems from the NAB Survey that labour costs are also on the rise.
Some key points from the interview:
-headline inflation is now expected to reach 7 per cent
-for a range of reasons inflation isn't expected to peak until the fourth quarter of the calendar year (higher energy and power prices won't feed through to households until then, being one reason)
-the annual rate of inflation will then start to decline - for example, petrol prices are up 30 per cent over the past year, but even if high prices do stick around, the rate of change will go back down to zero
-a supply response is clearly now underway globally
-interest rates will rise over the coming months...but how far is as yet unclear