GSFM investment specialist Stephen Miller has warned that inflation poses a significant threat to the Australian economy. According to Miller, the most appropriate response from the Reserve Bank of Australia (RBA) would be to raise the policy rate at its February meeting. GSFM is an Australian investment management firm, partnering with investment managers to deliver solutions to financial advisers, institutions, and their clients. They aim to provide access to high-calibre investment strategies.
Miller suggests that failing to act promptly could necessitate more aggressive policy rate increases in the future. He draws a parallel to the proverb ‘a stitch in time saves nine’, emphasising the importance of early intervention. The annual trimmed-mean inflation rate currently stands at 3.4 per cent, exceeding the RBA’s forecast of 3.2 per cent and falling outside the target band of 2 to 3 per cent. This occurs amidst a rebound in consumer spending and a resilient labour market.
Miller argues that the current economic conditions strongly favour a policy rate increase, given the rebound in consumer spending and the relatively strong state of the labour market. He also points out that other economic policies are not effectively addressing inflation, and that government policies at both state and federal levels are exacerbating the issue.
Miller also stated that successive Federal and State governments have not done enough in the way of structural reform to help with productivity growth. Meaningful reform may help ameliorate inflation pressures, but governments have long averted their eyes to this course of action.
