Former RBA Board member on ways to lower Australian inflation (& why RBA will hike today)

<p>A tweet from Warwick McKibbin, who was a member of the Reserve Bank of Australia policy board for a decade and is now a Professor of Economics at the Australian National University, is gaining attention here in Oz this morning:</p><p>Breaking down that tweet shows why the RBA will hike rates today:</p><p>Inflation in Australia is due to demand&gt;supply. To cut inflation:</p><ul><li> raise supply (through productivity) … the RBA can't do anything about this</li><li>cut demand through less government spending … the RBA can't do anything about this</li><li>or higher taxes … the RBA can't do anything about this</li><li>or raise interest rates … and, here is the one thing the RBA can do.</li></ul><p> So far policy has been to subsidise demand and leaving it again to the RBA as the last resort.</p><p>—-</p><p>The RBA statement is due at 2.30pm Sydney time, which is 2230 US Eastern time and 0330 GMT.</p><p>Earlier previews:</p><ul><li><a href="https://www.forexlive.com/centralbank/rba-shadow-board-recommends-a-rate-hike-at-tomorrows-monetary-policy-meeting-20231106/" target="_blank" data-article-link="true">RBA Shadow Board recommends a rate hike at tomorrow's monetary policy meeting</a></li></ul><ul><li><a href="https://www.forexlive.com/centralbank/failure-to-act-on-high-cpi-threatens-to-damage-the-reserve-bank-of-australias-credibility-20231026/" target="_blank" data-article-link="true">Failure to act on high CPI threatens to damage the Reserve Bank of Australia's credibility</a></li><li><a href="https://www.forexlive.com/centralbank/reuters-poll-rba-to-high-cash-rate-to-435-on-november-7-20231103/" target="_blank" data-article-link="true">Reuters Poll: RBA to high cash rate to 4.35% on November 7</a></li><li><a href="https://www.forexlive.com/centralbank/imf-tells-the-rba-to-hike-interest-rates-higher-and-hold-em-high-for-longer-20231101/" target="_blank" data-article-link="true">IMF tells the RBA to hike interest rates higher, and hold 'em high for longer</a></li><li><a href="https://www.forexlive.com/centralbank/westpac-now-forecasting-a-november-reserve-bank-of-australia-rate-hike-20231026/" target="_self">Westpac forecasting a November Reserve Bank of Australia rate hike</a></li></ul><ul><li><a href="https://www.forexlive.com/centralbank/ubs-forecasts-a-november-rba-interest-rate-hike-and-likely-more-to-come-after-that-20231025/" target="_blank" data-article-link="true">UBS forecasts a November RBA interest rate hike, and likely more to come after that</a></li><li><a href="https://www.forexlive.com/centralbank/rba-rate-hike-incoming-on-november-7-will-they-hike-again-in-december-20231025/" target="_self">RBA rate hike incoming on November 7 – will they hike again in December?</a></li><li><a href="https://www.forexlive.com/centralbank/commonwealth-bank-of-australia-forecast-a-25bp-rba-rate-hike-on-november-7-20231025/" target="_self">Commonwealth Bank of Australia forecast a 25bp RBA rate hike on November 7</a></li><li><a href="https://www.forexlive.com/centralbank/australia-demand-for-luxury-supercars-through-the-roof-20231025/" target="_self">Australia – Demand for luxury supercars "through the roof"</a></li><li><a href="https://www.forexlive.com/news/australian-treasurer-chalmers-says-inflation-is-moderating-but-persistent-20231025/" target="_self">Australian Treasurer Chalmers says inflation is moderating but persistent</a></li><li><a href="https://www.forexlive.com/centralbank/anz-forecasts-a-25bp-rba-interest-rate-hike-on-november-7-previous-forecast-was-december-20231025/" target="_self">ANZ forecasts a 25bp RBA interest rate hike on November 7 (previous forecast was December)</a></li><li><a href="https://www.forexlive.com/centralbank/australia-market-is-rapidly-pricing-in-a-november-rate-hike-after-surging-inflation-data-20231025/" target="_self">Australia – market is rapidly pricing in a November rate hike after surging inflation data</a></li><li><a href="https://www.forexlive.com/centralbank/audusd-jumped-higher-on-australian-inflation-data-november-7-rate-hike-is-likely-now-20231025/" target="_self">AUD/USD jumped higher on Australian inflation data, November 7 rate hike is likely now.</a></li></ul><p>Analyst expectations are (nearly) unanimous that the Bank will hike its cash rate by 25bp but market pricing is not nearly so certain.</p>

This article was written by Eamonn Sheridan at www.forexlive.com.