Inflation's only cure may force RBA to trigger recession
RBA may need to push unemployment above 5 per cent to control inflation.
Australia's inflation keeps rising even after four Reserve Bank interest rate hikes. The problem is simple: there's too much money chasing too few goods and services.
The RBA has only two ways out. One is to boost supply, but that's slow and hard.
The other is to lower demand by raising rates so high that people lose jobs and stop spending. Former NAB chief economist Alan Oster says unemployment could exceed 5 per cent if the RBA needs to keep hiking.
Other economists warn Australia could slide into recession. The RBA's own deputy governor called this scenario a "nightmare": unanchored inflation expectations where businesses stop expecting prices to fall and lock in higher costs for good.
- Four
- Rate hikes so far
- Above 5 per cent
- Joblessness threshold
- -0.2 per cent over the year
- Productivity trend
Why it mattersInterest rate rises will squeeze household budgets further, and job losses could follow if the RBA must break demand to stop inflation.
AustraliaAustralians face higher mortgage payments, tighter household budgets, and risk of job losses if inflation forces the RBA into its bleak scenario.
✓ Claims checked against the source. checked 3 h ago
