The government has not helped the inflation cause or the Reserve Bank with its industrial relations stitch-up.
The 7.8 per cent annual inflation rate posted for the end of 2022 has tempered the better-than-expected start to 2023 as the sharemarket cheers the end of China’s COVID-19 lockdowns and Australian consumers seemingly continue to spend solidly.
Sure this is not like 1970s stagflation. This week’s headline consumer price index was only modestly above market expectations and came in slightly below the Reserve Bank’s official forecast of 8 per cent. But measures of core inflation came in above the Reserve Bank’s forecasts, suggesting that prices growth is becoming more broadly based. It is notably accelerating in the labour-intensive services sector.
This year, Labor plans to reregulate the job market further by targeting the flexibility of the gig economy. Australia is fortunate that the global energy crisis and elevated prices for our iron ore exports are pumping up national income. This leaves Australia better placed to avoid the recession that central banks appear set to engineer in the US, Britain and New Zealand. But we can only press that luck so far.
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