Comment on We won’t fix inflation while economists stay in denial about its causes
macrocephalic@kbin.social 1 year ago
We are generally taught that there's a balancing act going on between inflation and interest rates, but that's not really true. There's a balancing act going on between inflation and unemployment - and interest rates are the way to control unemployment. When the government says that inflation is too high what they're saying is that too many people have money and the way to fix it is to get a few tens or hundreds of thousands of them fired.
DavidDoesLemmy@aussie.zone 1 year ago
I don’t know if that’s true. They want to get people spending less. Being unemployed is one reason you might spend less. Having high mortgage repayments is another reason.
macrocephalic@kbin.social 1 year ago
https://www.abc.net.au/news/2023-06-25/the-rba-wants-more-unemployment-lets-applaud-it/102506500
It's well known that interest rates cause the unemployment level to rise, the RBA governor even covered it in a speech recently (https://www.theguardian.com/business/2023/jun/22/rba-reserve-bank-australia-unemployment-inflation) and they have a page explaining it (https://www.rba.gov.au/education/resources/explainers/nairu.html).
Even though it's been suggested and documented that our current inflation issues are driven by corporate price rises and lingering pandemic supply issues, the government outsources the responsibility for interest rates to the RBA - but the only tool they have is monetary policy.
Related: it's shown that full employment benefits everyone, but it benefits the least advantaged most https://grattan.edu.au/news/when-unemployment-falls-disadvantaged-workers-benefit-most/ so there really is a dichotomy between corporate profits and social wellbeing.