ICYMI – RBA Gov. Lowe said lifting productivity growth a greater challenge than inflation

Reserve Bank of Australia Governor Lowe spoke at the G20 finance meeting in India, alongside Australian Treasurer Chalmers.

On inflation and productivity:

  • The reality that most of us face is that productivity growth has slowed down in most of our economies
  • It means lower sustainable growth in real wages, it means a limited increase in output as well.
  • low productivity growth means economic and social problems
  • I agree the immediate consequence and the immediate challenge is to get inflation down. “We really need to be successful there but I think the bigger challenge is to lift productivity growth.

The Reserve Bank of Australia have limited policy tools to achieve their two mandates (employment and low inflation in a nutshell). The RBA have no tools to address or improve productivity. Maybe if the RBA has spent more effort in doing what it can do, and less on talking about what it can’t, it might have addressed runaway inflation sooner and more effectively.

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