Over time, there is a common element to movements in interest rates around the world. The level of interest rates in all countries is influenced by movements in the neutral global real interest rate. During the financial crisis, the neutral global rate fell and this has had an important influence on the setting of interest rates in all countries, including here in Australia.
But businesses could not keep up with demand, and this put significant upward pressure on services prices. With the information we had a year ago, it was impossible to foresee all these developments. But it's too convenient to write off the high inflation of 2022 as just bad luck. We need to reflect on what we learned. I see three lessons.