Administrative announcements
As the ballistic missiles between Iran and Qatar seem to have gone quiet for the time being I am making another attempt to get to Europe today for work commitments. Last week, my flights were cancelled due to the disruptions around Doha Airport. Anyway, fingers crossed. I will be back writing here again on Thursday, July 3, 2025. Here is some music to listen to while you are missing my posts (-:
The Australian Bureau of Statistics (ABS) released the latest CPI data yesterday (June 26, 2025) – Monthly Consumer Price Index Indicator – for May 2025, which showed that the annual underlying inflation rate, which excludes volatile items continues to fall – from 2.4 per cent to 2.1 per cent. The trimmed mean rate (which the RBA monitors as part of the monetary policy deliberations) fell from 2.8 per cent to 2.4 per cent. All the measures that the ABS publish (including or excluding volatile items) are now well within the ABS’s inflation targetting range which is currently 2 to 3 per cent. What is now clear is that this inflationary episode was a transitory phenomenon and did not justify the heavy-handed way the central banks responded to it. On June 8, 2021, the UK Guardian published an Op Ed I wrote about inflation – Price rises should be short-lived – so let’s not resurrect inflation as a bogeyman. In that article, and in several other forums since – written, TV, radio, presentations at events – I articulated the narrative that the inflationary pressures were transitory and would abate without the need for interest rate increases or cut backs in net government spending. In the subsequent months, I received a lot of flack from fellow economists and those out in the Twitter-verse etc who sent me quotes from the likes of Larry Summers and other prominent main stream economists who claimed that interest rates would have to rise and government net spending cut to push up unemployment towards some conception they had of the NAIRU, where inflation would stabilise. I was also told that the emergence of the inflationary pressures signalled the death knell for Modern Monetary Theory (MMT) – the critics apparently had some idea that the pressures were caused by excessive government spending and slack monetary settings which demonstrated in their mind that this was proof that MMT policies were dangerous. The evidence is that this episode was nothing like the 1970s inflation.
The global financial press think they are finally on a winner (or should that be loser) when it comes to commentary about the Japanese economy. Over the last few years in the Covid-induced inflation, the Japanese inflation rate has now consolidated and it is safe to say that the era of deflation is over. Coupled with the government (and business) goal of driving faster nominal wages growth to provide some real gains to offset the long period of wage stagnation and real wage cuts, it is unlikely that Japan will return to the chronic deflation, which has defined the long period since the asset bubble collapsed in the early 1990s. It thus comes as no surprise that longer-term bond yields have risen somewhat. But apparently this spells major problems for the Japanese government. I disagree and this is why.
Today is a public holiday in the parts of Australia that I live and I have travel commitments. So I’ll be back on Wednesday. What is this holiday about?
Today, on May 1, we celebrate – International Workers’ Day – which is a “celebration of labourers and the working classes” and keeps the hope alive that solidarity can prevail and together we can turn the ship around.
So raise our glasses!
It is a public holiday in Australia today and I decided that I would use the time, which is free of workplace-type interruptions, to work on a project that has an impending (very) deadline. I also did a podcast interview…
Dear Readers I apologise for the lack of connectivity over the last 36 hours or so. My research centre and related WWW pages are delivered by servers that we maintain within a larger data centre in Adelaide. On Wednesday evening…
Today (November 27, 2024), the Australian Bureau of Statistics (ABS) released the latest – Monthly Consumer Price Index Indicator – for November 2024, which showed that the annual underlying inflation rate, which excludes volatile items continues to fall – from 3.5 per cent to 3.2 per cent. The overall CPI rate (including the volatile items) rose slightly from 2.1 per cent to 2.3 per cent, but that was mostly due to the timing of government electricity rebates between October and November. In other words, the slight rise cannot be interpreted as signalling a renewed inflationary spiral is underway. All the indicators are suggesting inflation is declining and the major drivers are abating. The overall rate has been at the lower end of the RBA’s inflation targetting range (2 to 3 per cent) for four successive months now, yet the RBA continues to claim they fear a wages breakout and that unemployment needs to increase. The RBA has gone rogue and its public statements bear little relationship with reality. It is clear that the residual inflationary drivers are not the result of excess demand but rather reflect transitory factors like weather events, institutionally-driven price adjustments (such as indexation arrangements), and abuse of anti-competitive, corporate power. The general conclusion is that the global factors that drove the inflationary pressures have largely resolved and that the outlook for inflation is for continued decline. There is also evidence that the RBA has caused some of the persistence in the inflation rate through the impact of the interest rate hikes on business costs and rental accommodation.
It’s Wednesday and there are a few topics that caught my attention this week as well as some announcements. And to finish we have some great music.
