Conflicts among objectives

Phillips Curve

Short-run tradeoff between inflation and unemployment

Example of low unemployment with manageable inflation

2024, around 4% unemployment

Kuznets Curve

Inequality rises then falls as an economy develops

Mining profits flowing overseas

40%

Structural unemployment after MBI/2012

72,000 (Dutch Disease)

Twin deficit hypothesis

Government borrowing financed by foreigners raises NFL and NPY outflows, deteriorating the CA

NAIRU estimate

4.5%

Australian NFD

$1.4 trillion, 50% of GDP

Foreign-held government bonds

52%

RBA cash rate 2026

4.35%

Okun's law growth threshold

3% needed for low unemployment; above 1.9% may trigger inflation (HSBC)

Warwick McKibbin on policy coordination

"you need everything to work together"

Ross Gittins on oligopolies

Account for 75% of inflation from supply-side pricing, rather than demand-pull

Global influences on policy

Speculative financial markets, similar MP and tax rates across advanced countries, IBC

Federal/state policy conflict example

Victoria resisted aged care reforms due to staff shortages