In this week’s Treasury of Common Sense with Radio 2GB’s Luke Grant, we discussed the RBA’s latest interest rate hike and why inflationary pressures will remain elevated due to soaring rents and energy prices.
I also explained why the RBA is caught between and ‘rock and hard place’ with rates because it only has one tool to fight inflation (the official cash rate), and most of the inflation-fighting levers actually rest with the federal government.
Interest rates are also an incredibly inefficient and inequitable inflation fighting tool because they only target the one-third of households with mortgages directly.
Instead, the RBA should pressure the federal government to lower inflation by intervening directly to crush the east coast gas cartel to lower gas and electricity prices.
Doing so would lower inflation across the economy, since energy is a key input cost to almost everything.
The federal government should also cut immigration to a level where the supply of housing, infrastructure and business investment can keep pace.
Otherwise, productivity will decrease and inflation will rise (most obviously via the rental market).
The Treasury of Common Sense is a weekly radio segment on Radio 2GB, aired on Thursday morning across NSW and QLD.
