“The only way it will work is by holding our dollar a bit higher and hence imported goods and commodities incl oil will be cheaper”
One of the side effects of a higher interest rate is the $AUD rises.
The undesirable effect is that all our exports will be worth less in $AUD. There is no easy answer because everything is priced is $USD. And as you correctly said the cause of this inflation is entirely external. Putin, over reaction to Covid and China supply chains.
Of greatest curiosity to me is what level of interest rates will begin to cause widespread distress. Of course the banks have modelled this but are keeping their results top secret.
If the late ‘80s is anything to go by, the rise from around 7% to 18% hit hard. So say about a 150% rise, which means interest rates can rise from 3% now to say 8% before widespread financial trauma. 8% isn’t that high a number in historical terms. Yikes!
