The Reserve Bank wants more unemployment. It should be applauded for admitting it

The Reserve Bank says it needs unemployment to rise to bring inflation down, and we should welcome their plain speaking, writes Gareth Hutchens.

5 comments

This idea only works if it's wage growth driving Inflation. Since we all know it's corporate profits, this idea both doesn't fix Inflation and hurts those who lose their jobs unnecessary
- It will work eventually. Once everyone is completely beaten down they won't be able to pay the inflated prices for things no matter how essential they are - and then inflation will go down.
  
  Unfortunately the politicians have the ability to change taxes and legislature - which is what we need - but they won't because apparently we can't tolerate change that might hurt our rich overlords (see: 2019 election). The RBA only has one tool at their disposal but they're expected to fix everything with it.
  
  The government would have to employ its own people to do the economic modelling instead of relying on the same people private corporations do to assist them.
It just shows the economic theory we have relied on for years is being flipped on its head. RBA is technically correct in its assessment but we have seen over the last 2 years the theory has not been working.

Increased Rates > Unemployment goes down > House prices go up > Wages still stable.

Think its time many of us economists reassess how the market is going to function in the next 5-10 years.