This is what you get if your only goal in government is to meet the needs of corporations embedded in the energy and immigration economies. BofA:
For a typical inflation targeting central bank, the reaction function is usually represented by a Taylor rule.
This means that, in addition to the distance between observed inflation and the target, the gap between economic activity from its trend is a key variable.
In this report, we map output and inflation gaps for G10 and major EMs.
While there is always uncertainty output gap estimates, it is not surprising that central banks have decoupled.
Note how Australia is furthest from its inflation target while having the third largest gap to trend growth.
In short, Australia has the worst case of stagflation in the developed world.
This derives largely from two huge policy blunders:
- over-migration driving a rental shock and weak wages, and
- the failure to contain the Ukraine War energy shock, even though we have heaps of cheap gas.
In short, Albononics has delivered record-breaking stagflation, leading directly to record falls in living standards in two years:
Amazingly inept government.
