Opinion Hey RBA boomer, things have changed a lot since the 1970s
Sorry, but Reserve Bank governor Dr Philip Lowe’s call for ordinary Australians to make further sacrifice next year in his unfinished fight against “the scourge of inflation” doesn’t hold water. His crusade to save us all from a wage-price spiral is like Don Quixote tilting at windmills only he can see.for the year, Lowe “highlighted the possibility of a wage-price spiral” in Australia.
One reason Lowe doesn’t have to raise rates as far as many overpaid money-market people imagine is that with real wages having fallen in recent years, and are expected to keep falling, the nation’s employers are doing his job for him.It’s clear that Lowe knows a lot about how financial markets work, but not much about labour markets.
“And let’s say we all accepted the idea, which [has] a natural appeal: ‘inflation is 7 per cent, I should be compensated for that in my wages’. If that were to happen, what do you think inflation would be next year? Seven per cent, plus or minus. First, it assumes that if workers decide they want a 7 per cent pay rise, bosses have no choice but to hand it over. This is fantasy land.
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