The Reserve Bank's fifth interest rate hike of the year came as price increases showed signs of accelerating toward the end of the year. Challenger chief economist Jonathan Kearns noted that no other comparable advanced economy or the eurozone matches Australia's severe level of inflation. However, significantly better employment figures relative to Canada, New Zealand, and Europe help cushion the pressure felt by local households. This dynamic leaves the nation ranked moderately overall when joblessness is factored alongside rapid living-cost increases.
Key points
Severe inflationary pressures make Australia an outlier compared to other advanced econom…: Severe inflationary pressures make Australia an outlier compared to other advanced economies and the eurozone.
Strong domestic employment conditions actively offset the intense economic strain generat…: Strong domestic employment conditions actively offset the intense economic strain generated by surging consumer prices.
Arthur Okun's misery index positions Australia in the middle tier because resilient jobs…: Arthur Okun's misery index positions Australia in the middle tier because resilient jobs balance out worst-ranked inflation.
Sources checked by our analysis pipeline: 1
Is Australia’s inflation problem worse than the rest of the world’s?
A day after the Reserve Bank delivered its fifth interest rate hike for the year, increasingly stressed mortgage holders would be justified asking.
For Jonathan Kearns, the chief economist at Challenger, the answer is easy.
“Our inflation problem is worse than in other countries, that is very clear,” Kearns says.
The stats tell the story.
Consumer prices on average climbed by 4.3% in the year to September, and are anticipated to climb even faster by year’s end.
A quick survey of other advanced countries, and the eurozone, shows none with inflation near our level.
So far, so bad.
But before we break out the pitchforks, there is an important nuance that’s worth appreciating.
While our cost of living here is rising faster than in comparable countries, our labour market is stronger.
“Our performance in unemployment has been much better than in New Zealand, Canada and in Europe, and that is a positive thing for Australia,” Kearns says.
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