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> "Do we really need to continue focusing mostly on inflation when 89% of the private economy is in a recession and the 11% which is booming — new era pursuits

> "Do we really need to continue focusing mostly on inflation when 89% of the private economy is in a recession and the 11% which is booming — new era pursuits — are by their very nature 'disinflationary'?" I've been thinking the same thing about Australia. The federal government has withdrawn power bill subsidies, which boosted inflation figures, causing the central bank to raise interest rates. Does it really make sense to raise interest rates when peoples power bills are going up? Wouldn't higher power bills reduce people's spending without requiring interest rates to be raised? The same with gasoline prices.

tonyedgecombe 8mo ago
Interest rates are a blunt instrument but they do have an impact. The biggest problem is the pain isn't spread evenly. If you have just fixed your mortgage for five years then they don't impact you but if you are just about to renew then you will be bearing more of the cost. If you are a net saver then increases are generally a good thing.
- Intermernet 8mo ago
  Australia has fairly short fixed term mortgages. There are people who are barely recovering from covid effects on the interest rates. There are many who lost everything. Another bout of "high interest rates are a blunt instrument" could cause serious problems. Note. This doesn't affect me, and I have strong opinions on the property market in Australia, but I'm pointing out that many people will go to the wall if interest rates are increased again,despite how much I think they may deserve it.
  - tonyedgecombe 8mo ago
    I think it’s well established in economic circles that unemployment goes up as inflation falls. We are seeing signs of this in the UK at the moment. Letting it run away causes its own problems though. Take a look at South America to see what happens if you can’t manage inflation.
    - Intermernet 8mo ago
      Inflation and unemployment are seen as results of demand. They're both regarded as effects. One isn't the cause of the other. At least in most economic theory... Which is possibly not the best theory to put much weight in, considering how changeable and unproven it is.
      - tonyedgecombe 8mo ago
        No but they are inversely correlated. As you bring inflation down you expect unemployment to rise.

tonyedgecombe 8mo ago

Interest rates are a blunt instrument but they do have an impact. The biggest problem is the pain isn't spread evenly. If you have just fixed your mortgage for five years then they don't impact you but if you are just about to renew then you will be bearing more of the cost. If you are a net saver then increases are generally a good thing.

Intermernet 8mo ago
Australia has fairly short fixed term mortgages. There are people who are barely recovering from covid effects on the interest rates. There are many who lost everything. Another bout of "high interest rates are a blunt instrument" could cause serious problems. Note. This doesn't affect me, and I have strong opinions on the property market in Australia, but I'm pointing out that many people will go to the wall if interest rates are increased again,despite how much I think they may deserve it.
- tonyedgecombe 8mo ago
  I think it’s well established in economic circles that unemployment goes up as inflation falls. We are seeing signs of this in the UK at the moment. Letting it run away causes its own problems though. Take a look at South America to see what happens if you can’t manage inflation.
  - Intermernet 8mo ago
    Inflation and unemployment are seen as results of demand. They're both regarded as effects. One isn't the cause of the other. At least in most economic theory... Which is possibly not the best theory to put much weight in, considering how changeable and unproven it is.
    - tonyedgecombe 8mo ago
      No but they are inversely correlated. As you bring inflation down you expect unemployment to rise.