Inflation: Unpopular policies could be what’s needed to counteract Reserve Bank of Australia rate rises
Economists suggest that the Australian federal government could use fiscal levers, such as increasing the compulsory superannuation rate, to combat inflation rather than relying solely on Reserve Bank interest rate hikes. Prime Minister Anthony Albanese has criticized rate hikes as a 'blunt instrument' for economic management.
Why it matters
The debate highlights the tension between monetary policy and fiscal policy in managing the cost-of-living crisis in Australia.
shares Share article Economists say there are more levers the federal government could pull to bring down sticky inflation to ease pressure on the Reserve Bank of Australia (RBA) as it wields an increasingly blunt tool.
Hotter-than-expected inflation of 4.3 per cent has triggered market expectations of a fifth interest rate rise at the RBA meeting on Tuesday.
RBA Governor Michele Bullock is determined to rein in inflation back to the 2-3 per cent range and in September declared that “the board will increase interest rates again if that’s what’s needed to get inflation down”.
But in a recent and rare remark against the central bank, Prime Minister Anthony Albanese told Nine newspapers that interest rates were a “blunt instrument”.
So, what sharper tools could be used to tackle inflation?
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