Everyone is talking about the cost of living, and it’s not hard to see why. A typical trip to the supermarket will cost about 8% more today than it did a year ago. Unsurprisingly, there’s a lot of argument about who, if anyone, is to blame for this, and what governments and the Reserve Bank can to do to help.
If we think, as commentators including Reserve Bank governor Philip Lowe would like us to do, in terms of a wage price spiral, it’s obvious that wages have not been driving the process so far. Real wages have fallen back to levels last seen in 2012. Despite this, Lowe and the RBA would like to hold wages down, in order to achieve a rapid reduction in inflation to the preferred range of 2-3%.
