RBA Faces Tough Inflation Fight as Price Rises Broaden Across Economy
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RBA governor says high inflation is increasingly driven by domestic services like hairdressers and dentists, not just imported goods. This makes it harder to control.
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To fight demand-driven inflation, RBA must use blunt tool of interest rates for the collective welfare of Australians, despite pain for mortgage holders.
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Inflation remains high across most of the CPI basket, with 2/3 of items above 3%. Signals aggregate demand exceeds supply.
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Lack of housing supply and materials, along with fast population growth, makes hitting government construction targets very difficult.
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RBA will likely keep rates high to reduce demand growth to a level businesses can meet, though governor acknowledges benefits of immigration.