The economic theories arising out of Australia are both amusing and frightening. In the latest bit of madness, an economist pleads for more inflation, blaming cheap overseas retailers for Australia’s housing bubble.
For mocking purposes only, please consider How Cheap Overseas Retailers are Pushing Up House Prices in Australia.
“DOWN Down! Prices are Down!” It’s a jingle that is practically our national anthem. But ever-cheaper retail — and the waves of foreign retailers competing on price — could seriously unbalance Australia.
“Down, Down” might be the only place our economy has left to go if we can’t solve the imbalance between crazy low retail prices and crazy high house prices.
Australia needs a little bit of inflation. Without it, our economy is stuck with low interest rates and all the issues they create. But inflation is turning out to be very hard to generate.
The world’s discount retailers have discovered Australia. Aldi, Costco and Uniqlo were wave one of the discount invasion. Wave two is coming in 2017 and mostly involves Amazon. Every retailer already here is working hard to be able to compete.
Prices keep falling and the RBA is finding life difficult. Its job is to keep inflation in line. It should be between two and three per cent per year. But for a while now inflation has been below that range.
You can almost imagine RBA governor Philip Lowe stomping round his office, muttering “bloody foreigners! Coming over here! Making our retail goods cheaper!”
Having low inflation is a problem. While of course we love low prices, overall the economy runs best with consistent predictable inflation. That’s what the RBA is supposed do. It is pledged to makes sure inflation is predictable: between two and three per cent.
The Think Engine
That bit of economic nonsense was courtesy of economist Jason Murphy. He publishes the blog Thomas The Thinkengine. You can follow Jason on Twitter @Jasemurphy.
…click on the above link to read the rest of the article…