Dr Sam Wylie

If you put some of your money aside, it'll grow at the interest rate into the money in the future.

So if you don't spend the money today, if you delay consumption and don't spend the money today and save it instead, then it'll grow at interest rates and investment rates

into consumption and spending in the future.

And so when you put interest rates up, saving becomes more attractive.

And so it restricts demand.

It also increases exports and reduces imports because it affects the currency and it affects the amount that companies invest.

So when interest rates go up, the cost of capital is going up.

And when the cost of anything goes up, labor or energy or capital, then companies do less investing.

So it slows down the economy.

The economy is running too hot.

then the Reserve Bank will push the lever up of interest rates to slow the economy down to where it's not running too hot and prices aren't rising too much.

That's where we are at the moment.

Uninflation is high.

The economy is running too hot.

We're pushing up interest rates.

But going into COVID-19, we had the opposite situation.

So the economy fell off a cliff after all the lockdowns started up.

And so the lever was pulled down to speed up the economy.

And it was pulled down all the way.

And now it's banging on the bottom.