Gareth Hutchins

Yeah, so an increase in labour supply following a rate hike

could dampen the RBA's contractionary impact on output.

So the RBA wants to raise interest rates to reduce output.

But if people are coming in because rates have been lifted, it could reduce that impact on output.

But on the other hand, it could actually amplify the push down on inflation because you're bringing in all these people into the labour force and it's putting downward pressure on wages.

A lot of demand.

A lot of demand.

A lot of demand.

Yeah, from employers.

There was still a strong demand there.

So you can imagine a situation where, a normal situation, where there wasn't such a strong amount of demand, maybe lifting interest rates wouldn't induce that increase in labour supply.

So in a sense, that increase in labour supply could be met because there was strong demand from employers that was already existing.

So it is specific to the Australian example in 2022, 23, 24.

But at the same time, they say that this still holds some lessons for advanced economies more generally, particularly countries where variable rate mortgages are so prevalent as they are in Australia.

Now that's another thing, because in Australia,

About 70% of households with mortgages are on variable rates.

Where your interest rate moves when the reserve bank hikes.

It's basically indexed to the cash rate.

So the cash rate goes up.

The major banks very quickly push the higher interest rates over to you.