Again last night, Captain Phil of the RBA broke with the convention of not blaming the government of the day:
This morning, we also discussed the consequences of not raising interest rates, and allowing high inflation to persist and become entrenched in expectations. If this were to happen, the evil of inflation would be with us for longer and the eventual increase in interest rates needed to bring it down would be greater. This would increase the risk of a severe recession and a sharp rise in unemployment. It would be much better to avoid such a costly outcome and so we have acted strongly to avoid it.
I want to acknowledge, though, that we are travelling along a narrow path here. The Board is seeking to return inflation to the 2 to 3 per cent range while at the same time keeping the economy on an even keel. It is still possible to do this, but there is a lot of uncertainty and we could be knocked off that narrow path, not least because of developments elsewhere in the world.
At our meeting we also discussed an updated set of economic forecasts. Our central case is that we do stay on that narrow path. Economic growth, though, is expected to slow next year because of the deterioration in the global economy and the squeeze on household finances. Our central forecast is that the unemployment rate holds steady for a while at what is a historically very low level, but then increases a bit as the economy slows. Inflation is expected to start declining early next year and then take a couple of years to return to the 2 to 3 per cent range. In the short term, the east coast floods are adding to the upwards pressure on food prices, and next year there are likely to be very large increases in the prices that households pay for gas and electricity.
I assume the RBA is be using the real prospective energy price shocks, not the politically watered-down versions in the budget of 20% this year and 30% next year.
The reality is more like 20-30% this year and 50-60% next year unless Albo finds a spine. Though, thankfully, futures have eased a little:
Despite gas still at $22.50Gj:
But coal has come off a little:
The RBA is right to be pissed. There is nothing it can do about utility bills. All it can do is crush other stuff to fit them in.
By forcing the RBA to do so, Albo is directing an enormous wealth transfer from households and businesses to foreign, China-sponsored, energy war profiteers.
How’s that for “Labor”.
