Michael Janda

So they're just saying it's going to cost a lot more.

In one scenario, people kind of continue on despite that, which is better for growth but means inflation stays higher for longer.

And therefore, interest rates might need to go higher for longer.

The second scenario is much worse for growth.

That's that one where unemployment goes above 5% and we are on the borderline of falling into recession.

That is much better for inflation, though.

That would have inflation below the middle of the Reserve Bank's target band before the end of this forecast period, which is middle of 2028, because the economy would be so weak

That you have a complete collapse in demand.

You can't pass on the price increases.

And this is part of the RBA strategy.

Take demand out of the economy, then consumers are adding competitive pressure on businesses not to pass through these cost increases.

You know, businesses are expecting to see their costs go up 10 or 15% over the next year.

But so far, they're only expecting to be able to pass on about a third of that cost increase.

But if generalized price increases happen and all their competitors are able to get away with raising prices,

then they could pass on a lot more and then inflation stays a lot higher and that is what the RBA doesn't want to happen.

Yeah, and I guess the question most people have is what do we think the Reserve Bank's going to do next?

They've done three rate rises in a row.

It's hard to tell from this document.

I think there is a good chance they will now wait and see, having done three sharp rate hikes.

They have six weeks till the next meeting in the middle of June.