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The Australian Economy in 2022–23: Inflation and Higher Interest Rates in a Post‐COVID‐19 World

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  • Sarantis Tsiaplias
  • Jiao Wang

Abstract

Record levels of domestic and global stimulus during the COVID‐19 pandemic years helped to mitigate largely unparalleled downside risks. Post‐COVID‐19, inflation surged in Australia due to overseas factors such as the war in Ukraine, and domestic factors such as COVID‐related backlogs in the construction sector. To constrain inflation, the Reserve Bank shifted to a phase of aggressive monetary policy tightening in 2022. There are, however, cost of living ramifications associated with tighter monetary policy. Looking forward, there is significant uncertainty about the rate at which inflation will normalise, and the spending response of consumers to higher interest rates.

Suggested Citation

  • Sarantis Tsiaplias & Jiao Wang, 2023. "The Australian Economy in 2022–23: Inflation and Higher Interest Rates in a Post‐COVID‐19 World," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(1), pages 5-19, March.
    • Handle: RePEc:bla:ausecr:v:56:y:2023:i:1:p:5-19
    DOI: 10.1111/1467-8462.12498
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    References listed on IDEAS

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    1. G.C. Lim & Sarantis Tsiaplias, 2018. "Interest Rates, Local Housing Markets and House Price Over†reactions," The Economic Record, The Economic Society of Australia, vol. 94(S1), pages 33-48, June.
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    3. Jenny N. Lye & Ian M. McDonald, 2021. "Can loss aversion shed light on the deflation puzzle?," Review of Keynesian Economics, Edward Elgar Publishing, vol. 9(1), pages 11-42, January.
    4. Callum Jones & Mariano Kulish, 2022. "Yield Curve Control and Zero Interest Rate Policy in a Small Open Economy," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(3), pages 375-382, September.
    5. James Cloyne & Patrick Hürtgen, 2016. "The Macroeconomic Effects of Monetary Policy: A New Measure for the United Kingdom," American Economic Journal: Macroeconomics, American Economic Association, vol. 8(4), pages 75-102, October.
    6. Benjamin Beckers & Anthony Brassil, 2022. "Inflation Expectations in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 55(1), pages 125-135, March.
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    Cited by:

    1. Ohikhuare, Obaika M., 2023. "How geopolitical risk drives spillover interconnectedness between crude oil and exchange rate markets: Evidence from the Russia-Ukraine war," Resources Policy, Elsevier, vol. 86(PB).

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