The Reasons Behind and Lessons from the Past.

May 9, 2022

What caused the Reserve Bank to move away from its previously stated plans?

Namely… they were not going to move until:

  • Inflation was comfortably in the 2%-3% range.
  • Wages growth was above 3%.

The reasons that threw the Reserve Bank off course were simple:

  • Russia invaded Ukraine and has caused a global disruption to Oil, Coal, Gas markets (you felt this when Petrol hit $2.20 per litre and became an election issue). Prices go up because this feeds into the price of everything.
  • China decided to prolong its pursuit of Covid zero and has recently shut down Shanghai and then Beijing. Supply chains are in disarray (try getting anything delivered in a reasonable time – eg a car). Prices go up in a scramble for product.
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