RBA is engineering an economic slowdown but at what cost? Ian Verrender explains | The Business
Remember the good old days? The time when life was simple and opportunities endless? Except of course, often they aren’t always so great. Last week, Reserve Bank governor Michele Bullock batted away the idea that a recession was inevitable but finally conceded that unless inflation was brought to heel in a timely manner, it was a possibility. “If we don’t address this, inflation will get worse, and interest rates will have to be higher, and the economy in a worse position in order to address that,” she said. “So, it’s not our base case, I don’t want it, but if inflation expectations get away, that’s the sort of scenario you might be looking at.” Pandemic aside, we haven’t experienced a recession — one where the catalyst was rising interest rates — since the early 1990s. It’s a word that strikes fear into many in the community and for good reason.
ABC chief business correspondent explains why unemployment needs to rise to tame inflation and what that means for the economy. “I mean that’s the whole idea of raising interest rates,” he said. “You try to slow the economy down to slow demand down to meet supply. And unfortunately, one of the side effects of that is that people either lose their jobs or less people are employed or it becomes harder to find a job. There’s just no way around that really.” Ian Verrender says recessions can produce a lost generation of Australian workers. “So that’s a generation of people leaving school, leaving university, who can’t find the jobs that they want to find, or find a job at all in many cases.”
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