There’s talk about inflation and interest rates, but what are the real economic problems Australia faces?

On 01 February the Reserve Bank of Australia announced that the central bank’s interest rate target remains on hold at 0.1 per cent. This was in response to news last week that the inflation rate has picked up. People are now wondering just how long the RBA can hold off from increasing its interest rate. What are the challenges it faces? And what are the long term economic problems that Australia faces, yet no one wants to discuss it?

Can salaries and wages keep pace with inflation or might there be a wages explosion? Source: Courtesy SCW - 2022

Dr Peter McCawley AM, is former Dean of the Asian Development Bank and Associate Professor (Hon) at the Arndt-Corden Economics Division, Crawford School of Public Policy at ANU.  He explains to Sri Dean why his real concerns is the impact of Australia’s fiscal and monetary policies, which have been too lax for too long.

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The Reserve Bank faces a number of domestic and international challenges in controlling interest rates. Source: Photo by Brendon Thorne/Bloomberg via Getty Images, 07 DEC 2021