For a year, Reserve Bank of Australia Governor Philip Lowe has been talking of successfully navigating a narrow path to lower inflation while keeping unemployment near 50-year lows.
He expects quarterly growth to average just a 0.1% over the next four quarters, with a 50% chance that the economy would enter a recession.
Jonathan Kearns, chief economist at investment firm Challenger and a former RBA executive, says the risk of trying to hold on to job gains was that higher inflation expectations hardened and kept the actual inflation rate high.
And pushing rates higher is increasing the chance that Australia goes into a recession," said Kearns, who headed the RBA's domestic markets department until earlier this year.
A survey of union officials cited by Lowe showed that medium-term inflation expectations have risen to a 3-4% range.
Persons:
Philip Lowe, Lowe, Paul Bloxham, HSBC's, Bloxham, Jonathan Kearns, Kearns, Ivan Colhoun, Stella Qiu, Shri Navaratnam
Organizations:
CBA, HSBC, SYDNEY, Reserve Bank of Australia, Global Commodities, Commonwealth Bank of Australia, Challenger, National Australia Bank, Thomson
Locations:
Australia, New Zealand