New data has revealed Australia’s “misery index” remains high, fuelled by worries about stubborn inflation.
While in previous periods of economic turmoil high interest rates or unemployment played a greater role, this time inflation accounted for about half of the misery experienced by Australians between the June quarter of 2021 and the September quarter of 2023.
The index has tracked inflation, interest rates and unemployment in Australia since 1960s.
READ MORE: Reserve Bank tipped to keep interest rates on hold today
It remains high today in the wake of the COVID-19 pandemic, and is starting to creep up again, according to research by the Committee for Economic Development of Australia (CEDA) think tank.
Despite falling since its peaks, inflation continues to hurt households by forcing them to spend more of their income on the essentials of daily life.
But as the Reserve Bank of Australia (RBA) is finding, taking measures to bring it down can involve inflicting further economic pain.
Unfortunately, the central bank’s main weapon to reduce inflation is raising interest rates, which also hurts borrowers. The combined effect of 13 rate rises since May 2022 in Australia has added to the economic misery.
The RBA is hotly tipped to keep interest rates on hold at 4.35 per cent today for September.
Looking ahead, there is hope the high point of the “misery” index may soon wane, the CEDA researchers say.
Economists predict inflation worries to lessen in the months ahead, giving the RBA more room to cut interest rates.
While the full impact of the stage 3 tax cuts and energy bill relief are yet to be fully realised, early data suggests they are predominantly being channelled towards savings, which will help stop further inflation rises.
The resilient jobs market has also helped households maintain their incomes in the face of a faltering economy.
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