Sources: ABS; NAB; RBA. The return of inflation to target requires a more sustainable balance between aggregate demand and supply. The tool that the RBA has to achieve this balance is interest rates. I acknowledge that the use of this tool comes with complications. Its effects are felt unevenly across the community, with rising interest rises causing significant financial pressure for some households.
But this unevenness is not a reason to avoid using the tool that we have. It is certainly true that if the Board had not lifted interest rates as it has done, some households would have avoided, for a short period, the financial pressures that come with higher mortgage rates. But this short-term gain would have been at a much higher medium-term cost.