Pandemic-era disruptions may be driving Australia’s woeful productivity performance and threaten to keep inflation elevated, RBA governor Philip Lowe has warned
Pandemic-era disruptions that delayed investment plans, created havoc with supply chains and caused labour shortages may be driving Australia’s woeful productivity performance, Reserve Bank of Australia governor Philip Lowe says.from 3.85 per cent, Dr Lowe reiterated that further rate increases may be required and increasingly large pay rises were unsustainable without higher productivity growth.
“While the causation with inflation runs both ways, ongoing strong growth in unit labour costs would underpin ongoing high inflation outcomes. After jettisoning his oft-repeated guidance that “medium-term inflation expectations remain well anchored” from Tuesday’s post-meeting statement, Dr Lowe said measures of inflation expectations by union officials had jumped to about 3.5 per cent.
“But this short-term gain would have been at a much higher medium-term cost. If we had not tightened monetary policy, the cost of living would be higher for longer.”
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