Governor Lowe Calls For Labour Market And Fiscal Flexibility

In the context of the federal government’s push to get its industrial relations (see “Argument Over Industrial Relations Bill Heats Up”) changes passed through the senate before the break, RBA Governor Lowe gave his opinion on how the labour market should be managed in his speech last night titled “Price Stability, the Supply Side and Prosperity”.

• Governor Lowe commented that in the post-pandemic world of increased risks of supply shocks from deglobalisation, green-energy transition, aging population and natural disasters, both fiscal policy and the labour market need to be flexible.
  “In a world of more frequent supply shocks, we will be better off if there is flexibility in our labour and product markets so that we can respond quickly and effectively. This includes flexibility in terms of fiscal policy, ...”
• Given the increased chance of shocks, Governor Lowe recommended that the structural deficit position be robust.
• He also called for policies to lift Australia’s productivity rate to improve efficiency.
• He also said these shocks would make it harder to achieve the inflation target but it could still be done.
• Regarding current monetary policy his comments were in line with previous RBA statements. He reiterated that current high inflation must only be temporary.