Stagflation Warning from Leading Economist

Inflation topic

Energy Minister Chris Bown said 410 petrol stations were out of diesel and another 145 stations were out of unleaded petrol.

Two Australian economists warned about stagflation.

Professor Bob Gregory said we're seeing the early stages of stagflation in Australia.

Should we prepare for stagflation due to the Iran war?

Dr Martin Parkinson said there's a real risk of stagflation.

They pointed to the global oil crisis as the problem source.

The war in the Middle East damaged energy supplies and pushed inflation into the global system.

The consequences of this war will have long-lasting effects.

The forces unleashed will have long-lasting effects.

Stagflation is happening

Stagflation is stagnation and high inflation.

It can be accompanied by rising unemployment and recession.

The World Bank warned the global economy will experience stagflation.

In the 1970s, many economies experienced stagflation, including Australia.

Professor Gregory participated in policy debates in Australia in the 1970s.

Gregory discussed the oil crisis and similarities with the 1970s on a podcast.

You can listen to the podcast.

Could stagflation happen today?

Professor Gregory thinks stagflation will happen and is happening.

Inflation will go up, and unemployment will rise.

The question is how big stagflation will be.

It depends on how long the oil price increase lasts.

If the war ends promptly, the Reserve Bank will let inflation work its way through.

Emeritus professor Bob Gregory says stagflation is happening, but not as bad as the 1970s.

If the war continues, people will adjust to higher petrol prices.

The treasurer is aware of the situation.

Treasury simulations show higher unemployment and inflation.

The extent of inflation and unemployment is moderate.

Professor Gregory made those comments two weeks ago.

Former RBA assistant governor Luci Ellis said the RBA will lift interest rates.

The cash rate target will go up to 4.85 per cent.

Ms Ellis said the fuel excise cut will reduce near-term inflation.

Headline inflation will still hit 5.4 per cent in the June quarter.

Unemployment will rise to 5 per cent as the economy weakens.

The risk increases as the war continues

Dr Parkinson said he's concerned about stagflation, but hopes it can be avoided.

There's a risk of stagflation, and it goes up the longer the conflict goes on.

Dr Martin Parkinson says the risk of stagflation is increasing.

The world's energy and trade patterns are uncertain after the war.

The forces unleashed will have long-lasting effects.

Robert Malley says Donald Trump's address was designed to deceive.

US President Donald Trump announced his war against Iran had been won.

Trump said he wouldn't bother reopening the Strait of Hormuz.

His announcement sent Australia's stock market tumbling.

New crises, different ideas

Australians wonder if they can manage inflation with various policies.

Policymakers experiment during major crises.

Guessing the oil price top is a challenge.

In the 1970s, the Fraser government tried to control inflation by controlling the money supply.

The federal treasurer set annual growth targets for a monetary aggregate.

That period of monetary targeting lasted nearly nine years.

Joan Robinson suggested Australia needed a new industrial relations climate.

She said cooperation between unions and employers could stop wages and inflation from rising.

Instead of raising interest rates, there are creative ways to manage inflation.

The Hawke Labor government adopted an incomes policy in the 1980s.

Or go back further to the 1950s.

Liberal prime minister Robert Menzies chose to tackle high inflation by lifting taxes.

Menzies told parliament he'd collect enough tax to produce a budget surplus.

He increased company tax, income tax, excise duty, and sales tax.

A deficit budget in an inflationary period would be a scandal.

Menzies argued that pouring new money into the economy would aggravate inflation.

Should taxation be increased?

Windfall tax on gas exports

Will we see different inflation-fighting ideas today?

The Northern Territory government revived a 77-year-old law to force fuel retailers to provide their cost structure.

The Greens and One Nation want gas profits levied.

There are growing calls for a 25 per cent tax on gas exports.

Commonwealth Bank chief executive Matt Comyn suggests a gas tax could fund business tax incentives.

Will Treasurer Jim Chalmers experiment with novel approaches to head off stagflation?

And will his boss, Anthony Albanese, be brave enough to let him try?