Phil Lowe blinked today. Too afraid to rip off the band aid. One...

Phil Lowe blinked today. Too afraid to rip off the band aid. One of the last central bank governor's to start raising rates and maybe the first to slow the rate rises.

Certainly the asset price bubble was coming to a head in 2019. However inflation even back then was in the very low range compared to historical norms and I think this was due to extraordinarily low interest rates and low demanding investment yields required to service the low funding costs.

Covid-19 hit and the world was unprepared for greatly disrupted supply chains, locked down labour forces and to top it off energy costs ballooned and then Vlad invaded Ukraine and energy costs (especially coal and gas) took off.

Real wages of workers around the world had not gone up much at all over the last ten years and those workers were now faced with skyrocketing day to day living cost increases and rapid home loan interest cost increases.

All in all a perfect storm so those workers are now putting their hands out for higher wages and who could blame them.

The question is how to tame inflation without killing (demand) the economy. One medium term aim should be to increase the supply of housing.
Secondly have a co-ordinated plan to reign in energy costs. All governments in Australia over the last 20 years have failed to act on this and take the public and business with them.

Who knows where it will all end, proably tears for many. But whatever is being done now is not working.