A tweet from Warwick McKibbin, who was a member of the Reserve Bank of Australia policy board for a decade and is now a Professor of Economics at the Australian National University, is gaining attention here in Oz this morning:
Breaking down that tweet shows why the RBA will hike rates today:
Inflation in Australia is due to demand>supply. To cut inflation:
raise supply (through productivity) … the RBA can’t do anything about this
cut demand through less government spending … the RBA can’t do anything about this
or higher taxes … the RBA can’t do anything about this
or raise interest rates … and, here is the one thing the RBA can do.
So far policy has been to subsidise demand and leaving it again to the RBA as the last resort.
The RBA statement is due at 2.30pm Sydney time, which is 2230 US Eastern time and 0330 GMT.