Australia’s economy is suddenly in too good a place

AFTER a difficult few years, the Australian economy has clawed its way back to what the central bank chief calls “a pretty good spot”. Not the toast of the world it enjoyed before Covid-19 ended decades of uninterrupted growth, but enough to keep an underlying anxiety about the future at bay.

Inflation isn’t defeated, but has retreated from post-pandemic heights and, until several days ago, was expected to settle nicely in the bank’s target range. Interest rates have fallen. House prices, a vital yardstick of consumer confidence in a country where homeownership is deeply ingrained, have taken off again. What’s not to like?

It’s possible that things are a little too sweet. If there was any complacency, it was dealt a blow by figures last week that showed inflation unexpectedly jumped to 3 per cent, the upper limit of the Reserve Bank of Australia’s (RBA) preferred range.