The Reserve Bank of Australia still has work to do to return inflation to target, Deputy Governor Andrew Hauser said in a recent speech. He described price growth as “too high,” but noted that a decline in global oil prices—potentially driven by an easing of tensions between the U.S., Israel, and Iran—would be a welcome development.
Hauser explained that the board began raising interest rates in February after judging that demand was outstripping the economy’s supply capacity by more than anticipated, adding to inflationary pressures. He said that, because the economy is operating on the steeper part of the Phillips curve, acting promptly allows monetary policy to restrain inflation with a relatively smaller impact on unemployment.
“Timely policy steps to reduce inflationary pressures, of the kind we have taken, should also have a proportionally smaller unemployment cost,” he said.
Headline inflation eased to 4.0% in May, while underlying inflation picked up to 3.6%, remaining above the central bank’s 2%–3% target band.
