Alan Kohler: the problem in Australia is rising services costs

Alan Kohler: the problem in Australia is rising services costs. Goods inflation increased by 2% but services inflation increased by 3.7%. The international trade-exposure series also shows the same trend. Here, tradeables increased by 1%, non-tradeable inflation, which means domestically provided services, increased by 3.7%. All of this suggests a structural problem in service sector wages that has been generated by the re-regulation of the labour market. Clearly, the higher level of inflation supported by the higher level of underlying inflation now makes it all but impossible for the RBA to cut rates any time this year. Some commentators are talking about rate rises. I think that this is also incredibly unlikely. Australia is still trapped in a growth recession. We are making a slow recovery in a circumstance of further gradual rises in unemployment. It is implausible that any central bank would increase interest rates with unemployment going up.