5 ms·

What low interest rates? What goods shortages?

• opportune 4y ago
  In Australia the central bank rate is about 3% and inflation is much higher (I think 6-7% right now). There were goods shortages during COVID caused in part by broad increases in the monetary supply and difficulty in transportation (which is exacerbated by low unemployment, which is directly linked to aggregate demand, and hence interest rates). When unemployment is too low and inflation is too high, you are supposed to increase interest rates to lower aggregate demand. Yes, central banks are doing this now and it has had some effect so far, but they have not gone far enough to address the problem.
  • TheSpiceIsLife 4y ago
    Those conditions sing exist now. Who cares what the RBA rate is, let's talk about what mortgagees are paying on loans now. If the Australian government wanted to take money out of the supply it could, for example, (temporarily?) increase the GST and use that tax revenue to either / both pay back government debt or use it to ... pay public servants more. This concept that "the RBA only has one tool" is true as far as it goes, but obviously not the only way of tackling the issue.
    • Khaine 4y ago
      The rates you pay on your mortgage is strongly correlated with the RBA interbank rate. You are absolutely right, the government could increase the GST to reduce demand. That would be political suicide, but fiscal policy absolutely can play a role. The government has abdicated from this, so it can blame the independent RBA and banks.