 Hello and welcome. My name is Peter Martin. I'm the business and economy editor at The Conversation. I'm a visiting fellow at the A&Us Crawford School of Public Policy as well. And a distinguished alumni of Flinders University in South Australia. It's something that means a lot to me, although the term distinguished might not have been applied to me by my teachers at the time. I'm on the lands of the Ghana people in the Adelaide Plains. Our guest, Julie Toth, is on the lands of the Kulin Nation in what we now call Melbourne. And John Hawkins is on the lands of the Ngunnawal and Nambri people in Canberra, which is itself derived from a Ngunnawal word. I want to pay my respects to the elders of these lands on which we're conducting this conversation, past, present and emerging. This is a live stream and we want you to butt in starting now if you like with questions. The more, the sooner, the better. Use the chat function. Ask conversation readers a question and 10,000 will respond. We asked you, conversation readers, to name the three topics that would most influence your vote in the election. Number one was climate change, which is also, by the way, what came up when we surveyed economists with the Economic Society. Number two was the environment. One third picked that. Two thirds picked climate change. Coming in at number three, picked by 19.9%, 20% of you, one in five, was the cost of living, which is sort of on a par with its prominence. Number two in the ABC Vote Compass Survey. And those results, that interest was before the news about inflation last week, 5.1%. Before interest rates began climbing this week. It started at a quarter of a percentage point on your mortgage or whatever, but with no idea where it will end. Joining us is Julie Toth, a present at NAS group. And before that, for nine years, Chief Economist at the Australian Industry Group, where she gained an extraordinary insight into these things. And earlier, Senior Economist at the ANZ Bank, where she dealt with these kind of statistics every month. She's at present affiliated with Swinburne University. Also joining us is Canberra University's John Hawkins, previously with the Reserve Bank and the Treasury, as well as the Hong Kong Monetary Authority. And importantly, and that was fascinatingly for John, secretary to the Senate Economics Committee. As I said, in the words of Dean Martin, for those of you who are old enough to remember, keep those cards and letters coming in, keep the questions coming in. First, Julie, we're hearing that everything is going up except wages. It's almost a mantra. Is that right or essentially right? Yeah, that's a really good question, Peter. And the latest data that we have from the ABS on the Consumer Price Index does, in fact, indicate that just about every category included in that basket has gone up. I think 77 out of 87 categories, which is the most ever. Exactly. And that's really unusual. And it underscores the range of factors that are contributing to price rises at the moment. We're pretty much getting hit from every source you can think of. We've got the geopolitical considerations that are affecting commodity prices. We've got the local floods and previously fire damage, which actually is still having an effect on agricultural output and supply in some locations. And of course, we've got the COVID disruptions that have affected supply chains coming in and out of Australia and movement of goods around Australia. We've got a capacity crunch across several key sectors, most notably construction. And we've also got a couple of factors that have come out of fiscal policy nationally and with the states where some of those policies have in fact contributed to price rises, unfortunately. What do you mean? Most probably unintendedly. So, for example, the home builder scheme that heavily promoted renovations and home building through 2021, that brought forward a lot of construction activity. But it was at a time where capacity was constrained. And we are already seeing the results of that with very long delays, but also price increases across the board for building products and for getting things done. It's almost a perfect storm and quite unusual. It is. And I think what makes it tricky for households to navigate is in the past where when we've seen say one or two product categories rise in price, you can substitute out of them. So, you know, that's most notably in food and groceries, for example, where in the past we've had spikes of banana prices. So that means people buy another sort of fruit instead. It actually meant everything. It meant then that the banana, the consumer price index was not accurate because it showed that banana prices. People spend a certain portion of their fruit budget on bananas were racing up. But in fact, bananas are so substitutable for virtually no one was paying those. But that was then it's different now. Yes. Yeah. And some products are more substitutable than others, of course. So, you know, petrol is the most obvious example for most households. If you've got a petrol car, you can't put something else in it. You need to get around other things that fall into that category are rents. So the housing category in the CPI, the bulk of that reflects rental increases. And again, it's very difficult to substitute or avoid that. Well, to you, John Hawkins, one way of categorizing this, a simple way of categorizing it is to say, these are price increases that interest rates that even cutting back in our spending to a large degree can do nothing about. And perhaps even reserve bank you used to work for shouldn't be pushing up prices. Now, no simple categorization is right. How is, is that right to a large degree? And how is it wrong? Well, the reserve banks aiming at an inflation rate for the average of the prices of everything. So if it can make the price of the things that it can influence grow less than even if other things are going faster, it can try to keep the average inflation rate around the two to three percent target band. Right. So will it seems to me that now homebuilding prices are to some extent an exception because it's a fixed amount of labor and a big demand for homebuilding. But it seems to me, am I right that on almost everything else pushing up interest rates to sort of impoverish Australians a bit? That's the point of it. Won't make much difference. It's also a higher interest rate. Other things equal should make the exchange rate a bit stronger, and that should make import prices lower. So that that mechanism should still work. Except it might not, given that the U.S. overnight put up its its cash rate by double what we have. Yeah, but if we didn't move at all, that's right. Yeah, the interest rate differential is quite important for Australia's exchange rate. You know, there's lots of models of the Aussie dollar out there, but the most reliable predictors are the interest rate differential between Australia and U.S., followed by commodity prices. They're often working in different directions. So even just with those two, it gets quite complex. But as John said, you know, if we didn't follow the U.S., then that gap would get bigger and our dollar would be even lower, which actually adds to inflation even more. So it still works. The way that works, do I have this right? The way that works is if we put up interest rates, more foreigners bring money into the country because they think it's a you've got better returns on their investments. That pushes up the price of the dollar. You know, all other things being equal pushes it up relative to what it would have been. And that makes everything just that little bit more that comes from overseas just that little bit more affordable. Yes, that's right. It's sort of self-correcting thing. Now we have a question from Tracy Davis. Thank you. How quickly do you think that, well, I suppose this is actually a broader question, is what can we do or what could an incoming government do about wages to help them, you know, at least catch up? So a standard of living wasn't falling. A specific question, I'll ask you first, John, then Julie. How quickly do you think a Labor government could kickstart wage rises, bigger wage rises, by actually paying its public servants more? Is that a response and is it likely? John first. Well, they could do that sort of as quickly as they want to, I guess as far as the federal public servants are concerned, because a lot of public servants are state public servants and the federal government has sort of no say about that. But they might wait until the next schedule sort of negotiations on their contracts that will spread it out a bit. So you're talking about fare and pay rises. So there's annual minimum wage cases run by the Fair Work Commission. So there's, again, a delay in that happening. I can't hear you, Peter. Sorry about that. The good thing in this country, I suppose, is that the Fair Work Commission nearly always pays wage rises in accordance with inflation. I'm sure there's a delay, but I suppose there's that guarantee. Julie, what do you think can be done to increase wage increases? It might be worth just clarifying the relationship between the Fair Work Commission and the government because the Fair Work Commission is independent and it only changes the minimum wage once a year. That does have a big impact, though, because so many of the, even though only a small proportion of the workforce are paid exactly the minimum wage, a much larger number have a work under awards or contracts that are linked to minimum pay decisions. So it does have quite a big ripple on effect, even for workers that are on substantially higher rates than the minimum wage. As you said, the Fair Work Commission has traditionally looked at an inflation plus a margin model for adjusting the minimum wage each year, and those consultations are underway at the moment. The Australian government does, in fact, participate in those hearings, and it does present evidence each year at the minimum wage hearings. It's normally done through Treasury boffins coming along to the hearings and presenting the latest data and information. That has traditionally been an apolitical exercise, but that's not to say that the model for that might not change in the future. There's also ability for government to adjust awards for particular industries and occupations. So we can see that, for example, at the moment in the debate that's going on about award rates for aged care workers, for example. Well, in fact, both parties will be up for... There's a fair work value case at the moment, and both parties, despite the differences in presentation, both parties will have to pay because the government is the employer of aged care staff in the sense that it funds the people who pay them. Correct. So as well as the minimum wage, they can adjust wage rates across the award system. What was it like? Because you at the Australian Industry Group would have been part of that process. I've only just looked at the documentation, and it's massive. Look, it's a little bit like a wage version of the interest rate that we've just been discussing. The RBA's got the one rate, right? The cash rate that it can adjust, and it is often regarded as a bit of a sledgehammer approach. It's all or nothing. The minimum wage is a similar instrument in that it's a single rate that is set across the country, and it applies to everyone. And as I said, there are so many flow-ons to it that even though it's just that single number, it packs a big punch when it changes. We have a question from John Haggerty, which I'll put to you, John, and it's, if the government obtains and gives big wage increases, what will that have? On further increasing inflation, he asked, will it cut the intended benefit? And I suppose the related question is, is there a risk if we... Okay, so the published inflation rate at the moment is 5.1%. If employers give people 5% pay increases in the words of Carly Minogue, we should be so lucky, but if they did, will that just accelerate price rises further because employers will have to pay them? Do you first, John, then Charlie? Yeah, there is a risk that you can get a wage price spiral taking off, and that's why the Reserve Bank is acting to try to get the inflation rate down and numbers like 5% become established as people's idea of what inflation... And before the next wage case, I suppose. Yeah, and, Julie, is that a... Is that a sort of a risk? It is a risk, but that's assuming that all of it flows through. So if you think about a typical sort of small to medium business that needs to pay these rises, we could be cheeky and point out that compliance is a problem in some industries, so let's just be nice and assume that they do pay these increases when they're meant to. When all of these increases are factored in, there's a variety of ways that a typical business can cover that additional cost so they can put their prices up. They can find cost savings elsewhere in their business, and that's actually a good one, because it often means a productivity saving, so they can find a more efficient way of doing something, or they can cut some input costs, maybe get rid of some waste, or the other nasty one is they can cut the quantity of labour. So they're paying more per hour. They cover that by reducing the number of hours that they're paying for. So this is why we need to be a little bit careful with the wage rises, and particularly at the low end of the market, that we're not looking at a trade-off between the wage rate and the unemployment rate, because if businesses respond by cutting the quantity of labour, that results in an increase in under-employment and unemployment, and that's why the Fair Work Commission goes to such great lengths to get that balance right when it's looking at the minimum wage increases each year. Zooming out, John, is there a... It's a simple way of looking at it to say, look, the rest of the world has pushed up these costs largely. The rest of the world has cut our standard of living. There is nothing much that we can do about it. Yes, we can increase wages, but that will increase costs and increase prices. It's something we have to wear. Well, that's true of the petrol price. That's definitely been imposed on us by... Yeah, that wheat and the fertilizer and goods with computer chips in them and things like that. But there's a lot of things that have been going up in price faster that it's hard to see as much to do with the rest of the world. So, for example, the health component of the CPI went up by 3.5%. Housing went up by over 6%. It went down by almost 5%. So none of those, I think, we can blame on what's happening overseas. So there is certainly an increase in domestic cost pressures as well as the imported factors. There's a question here from Lee Constable. How big a factor in price rises is to slow down in migration? It would stand to reason that without enough workers, one way or another, you either can't make as many things, can't provide as good a service in cafes or whatever, or you're going to have to charge more to attract workers. And I suppose we can broaden out more generally. We'll start with you. What has the impact been of virtually zero migration or negative migration in net terms and a close to zero population growth on prices and I suppose unemployment as well? Yeah, that's a really complex one because we can think about population numbers in terms of the supply of labour, but also the demand for those services. But the other thing that's happened through the pandemic is a massive reduction in mobility for everyone. And that's played havoc with supply chains. So the population has declined, but it's also become much more difficult to move people around to where we need them. And both of those factors have played into the pricing. So let's see. When we look at, say, recreation and culture, which includes cafes, restaurants, the types of businesses that have been really hit hard by the, you know, I was going to say reduction, but down to almost zero for students and backpackers who typically work in those industries. For them, that's been a big factor. But for other industries like, say, construction, it's more about the reduced mobility and the transport disruptions that have happened. So it does get quite complex. There's another point that Sawless, like he used to work with you at the ANZ makes, which is hard to believe on the face of it, that closed borders have boosted spending by the Australians in Australia. So here's of the view. That's show. Yeah, that's correct. The easiest way of thinking about this, it's a pity we haven't got grass today, you know? What's an economics discussion? Draw a graph with my hands. Australia's got what's best described as a tourism spending deficit, a massive one. Before COVID closed our borders, starting from about sort of 2005, 2006 onwards, Australia in aggregate spent far more on international travel, international tourism outbound than the inbound flow. All of that stopped. So we're now benefiting from that money that we used to spend overseas. And that actually worries me a little bit when we look at the recovery scenarios because it seems to be all assumed that we're going to be spending a lot locally. But if you look at the historical pattern of what Australians like to do before COVID, they much preferred to go shopping in Bali than they did in Bahrain Bay or Brunswick or Parramatta. And, you know, that outflow of consumer spending will start to creep up again. You might even get a spike, you know? People are stuck. It certainly will be big. And also at the risk of denigrating Australia, Australia has the kind of attractions that many people haven't seen and would like to see once. And they probably just have. I should point out that question was from R.E. Sharp. Not R.E., Councilor. Hi, R.E. Thank you. And, John, how do you characterise the effects of this, I suppose, unprecedented near-zero population growth and, you know, certainly zero or negative net migration? Yeah. Now, I agree with Julie. There's probably a lot of pent-up demand for overseas travel that might be realised now that the borders have opened up. At the university, for example, we think we've got a few more local students in the last couple of years because students who would have gone on a gap year backpacking around Europe came to university again instead. So there's a question, though, how are they going to take their gap year between the second and third year at university? So what was your other question? Oh, just the effect of closed borders anyway. I suppose there are two offsetting effects. One is you don't have as many people here pushing up prices. The other is Australians can't spend overseas. And the other is you don't have people to meet the demand. That is, you don't have people. So firms need to either reduce their hours or pay their staff more to attract them and charge more. And then there's the view. I mean, I think this is overstated, but it's widely held that the main reason we have a low unemployment rate is because we don't have workers and temporary workers from overseas to fill those jobs. I think most studies on the economic effects of migration so that it adds more or less the same to demand and supply. I'm wondering if that's true in the short term, though. I think that's definitely, you know, it has to be the case long term, but maybe the unemployment rate has been driven down and maybe prices have been driven up just by what's happened immediately, you know? Yeah, well, it's something we haven't seen for over a century in Australia, that no net migration. So there's not a lot of data on which to assess that, I guess. It could be the case. I think we've been through such an unusual event, and it is still playing out that I don't know that we should draw too many conclusions from, you know, the short term immediate effects because, you know, this has been a total shock to the economy and it's been going on for a couple of years now, and it is genuinely unprecedented. So it's difficult to draw those conclusions from this single event. A question from Avis Williamson. Does the Reserve Bank have the right tools? Well, I suppose, tool, really. To control inflation. Or should it do other things? Or should the government do other things? Now, on the face of it, the government, it was open to the government, John, to do the opposite to what it did if it really wanted to restrain spending a bit, which it didn't, because it handed out money, but handed out, you know, checks of $250 and cut the petrol tax for a while. But, you know, if we think that in order to restrain prices, the Reserve Bank needs to impoverish people a bit by putting up interest rates a bit, should other tools be used? Should the government be heaven forbid taxing more or spending less in order to do that? Or is there something else the Reserve Bank can do? Is there another tool, that's available to us, that we're not really using? Well, economists generally talk about monetary policy and fiscal policy as being the two main ways. Fiscal being government spending and taxing. Monetary being... Monetary policies, the Reserve Bank putting up interest rates, and that's... I mean, they can do a bit in terms of whether how many government bonds they buy, but primarily their tool is interest rates. And that's the same all around the world. That's the way monetary policy works in most countries. And the other is fiscal policy, which as you say, is what the government does with the budget. So what they do with government spending and what they do with taxes. So if they want to reduce inflationary pressures, then they'd have a tighter fiscal policy. In other words, they'd spend less and they'd tax more. And as you say... It's like having your foot on the accelerator and your foot on the brake, the Reserve Bank's foot on the brake, and your foot on the accelerator. Yeah, well... A lot of people said that the budget will respond to political and economic aspects. And I think there's a bit to be said for that argument. I suppose it's the reason that we've got this sort of divergent approach and maybe it's been set up this way to really assist politicians in decision making. The politicians can blame the Reserve Bank by saying it's impoverishing you a bit, but it's independent. Yeah, bear in mind that we have got interest rates at, you know, historically low levels at the moment, abnormally low. And they have been for a while. And to some extent, we've got used to these extremely low interest rate settings. But if you look at the historical averages, they're certainly not anywhere near what the Reserve Bank or what most economists would regard as a normal range for interest rate settings. So the RBI does need to move back to that range at some point. Just to throw a little extra in the works in response to that question about other levers at the very micro end. And this is really sort of tinkering around the margins. The other place that government can assist with inflation is in a range of what we call administered pricing, which is government goods and services or government administered goods and services where they do actually have direct control over the pricing. So some examples of that are things like toll roads and public transport prices that typically are indexed to inflation each year. So that's usually within the remit of state government and it's often built into the service contracts with the providers of those services. So they'll typically have a contract where they will increase the price of a train ticket or the toll on the freeway by inflation or a set amount, whatever is greater. So those prices can be changed. Other examples that affect inflation are things like childcare subsidies, education fees, particularly at the higher education level and some of the hospital charges, pharmaceutical prices. All of these things are price regulated. You're almost saying that the best way to reduce prices is to reduce prices, which the government can do for a lot. Well, I'm just saying that for a discrete portion of what's in the CPI basket, there is more control than we are giving them credit for. And also for a lot of wages. The best way to increase wages is to increase wages given that governments are employers. But we've sort of got used to the idea that these things are done at arm's length. I was just going to ask you, Julie, before that, again drawing on your experience, you're talking about how interest rates are unbelievably low. The cash rate is clearly negative in real terms because it's so far below the 5% rate of inflation. It's not funny. Those low rates, the Australian industry group has lots of members who have the opportunity to invest and borrow. I'm wondering the extent to which low rates do encourage businesses to invest or whether it's a bit like leading a horse to water. You can lower the cost of investing but it doesn't make much difference. Yeah, look, this is a hot topic across economics, not just in Australia but globally because business investment rates have been extremely low and that feeds into problems with pushing up productivity. There's not a lot of evidence that it's the cost of capital, that's the barrier. And if that's not the reason why businesses are failing to invest and failing to grow, then we do need to look at other levers. I experienced the cost of capital is one factor but it's certainly not the only one. When you invest, you still need to get a rate of return. You need to get the basic reason for the investment flowing through your business. So even if the capital is cheap or almost free, you still need to have a reason to invest and a reason to grow. And if the businesses are not seeing that, either in the return on the investment or in the potential for growth, then it's difficult to get things moving. That's why they've done the R&D carryovers and there's been a lot of work in that space to encourage business investment in addition to cash rate. And we're still seeing relatively low rates. Yeah, it's as if business makes its decisions on the basis of whether or not the investment is needed. Correct. There's more to it than just the cost of credit. That's it. John, we have a question from Tracy Davis. I know you'll love this one. Do we have a low unemployment rate because the government has changed the definition for being unemployed? This is a very, very common concern that we can't believe the figures because the figures have been changed. Some people go so far as to say there's political interference, but that or not, there's a very common view and the definition has been modified a few times. There hasn't been any change to definition for quite a long time and it's the same definition it's used in most comparable overseas countries. Now, some people don't like the definition because if you work as long as one hour a week, you're counted as being employed, not unemployed, but the ABS also produces data on under-employment. So people who are working a few hours but not as many hours as they want, but the under-employment rate has also come down recently. What would you say to Tracy Davis and what would you say, Julie, because these are very widely held views and I think they're held partly because people's experience, lots of people's experience, tends not to be that of what the figures say, which is record low unemployment. Tracy, the unemployment rate is a statistical definition, so it's one of many measures. As John said, there's also the under-employment rate, there's the participation rate and then there's the just total population measures as well and all of those are showing different things. There is quite a lot of data on the number of hours that people work and actually the proportion of the workforce that are working one to 10 hours a week, for example, is minimal, it's absolutely tiny. All of it is based on labour force surveys that are conducted every month, so what they're asking people is what they were doing in that survey week. These are different numbers from what you see in the social security data. If you look at the number of people that are listed as unemployed in the labour force survey, that's not the same number as the people that are receiving unemployment benefits and at the moment the number of people receiving unemployment benefits is significantly higher than those that are showing up as unemployed in the labour force survey. To some extent it's just a data definition difference, but it's also speaking to people's experience because you can work a couple of hours and still receive those benefits, for example, which means that you wouldn't be counted as unemployed for survey purposes, you'd show up as underemployed, which is still a significant problem. Tracy, I can suggest this, write it down, Peter Whiteford, one of our authors about a week ago produced what I think was the best explanation of why the number on unemployment benefits is high and he's had to work it out by going into the figures and why the number unemployed as measured in answer to surveys is low. Firstly, the thing is you can be on unemployment benefits and still be employed because they're income related, not hours related, and you can be unemployed. In fact, most unemployed are not on unemployment benefits and he goes through it. There's a number of changes to do with COVID. We have a question about the elephant in the room, the number one concern of people in the conversation and ABC surveyed. The economic aspects of climate change, particularly, I guess, as they relate to prices. So, you know, we have this intergenerational report that looks at 40 years. The climate change, well, climate change is upon us and a lot more is imminent. What effect is that likely to have on economic growth? Negative, I guess. Prices, I guess. You know, upward, I guess. It's the big question. You first, John. Probably not any impact on inflation a longer term because I think the Reserve Bank will still be aiming to keep inflation at between 2% and 3% on average. But if the climate force is pushing up prices, then that would mean they'd have to keep probably interest rates a bit higher in order to achieve that target. Yeah, I see what you mean. I had this years ago when the Sydney Olympics were about to be held. It was the Sydney Olympic Authority produced a study showing, you know, it would boost the economy by this March and my sort of response to them was, well, if it did, the Reserve Bank would have just interest rates to make sure it didn't. I suppose that's one answer. Julie, what can we say, if anything, broad brush about the effect of climate change and what we'll have to do as a result? Yeah, there's such a huge question, isn't it? There's lots of estimates about what it might do to aggregate growth. But I think the bigger question is about how it changes the structure of our economy. So in the latest round of the inflation numbers, since that's the topic for today, we did see the effects of floods and we've certainly seen the effects of the bushfires two years ago. They all showed up in the pricing data and in the actual availability of certain classes of product. We're seeing it in commodity markets and in, you know, the shift in energy types and sources and starting to see that in transport in Australia. I'm really curious to see whether this huge increase we're seeing in petrol and diesel prices is in any way going to accelerate the move to electric vehicles. So much else working against it in Australia. But, you know, how does it change the structure of the economy and the structure of our industries and our consumption? My concern about that... Climate change could have is to make inflation more volatile, more bearable, because you'll have more extreme weather events and when you've got floods or bushfires and so on, that often leads to jumps in the price of foods. Correct and the price of insurance and I believe there was a report released earlier this week by the Climate Change Council looking at the impact on insurance pricing going forward from here. So there's lots of different elements to this in addition to the effect it has on our own living conditions. We have a question from Radiance. I hope I said that right. StratheD. About housing. People talk about inflation but for very good reasons one price rise isn't included. One category of... I suppose the biggest price rise isn't included in the consumer price index because land is not regarded as a consumer item. Price of building houses is included in the index and the price of rent is included in the index but not the price of land which was racing up at the rate of $1,000 a day for a while in New South Wales. It's now stopped for the moment perhaps in anticipation of rate rises. What can we do to make housing more affordable? It's a bit ridiculous to talk about the cost of living as we're doing without talking about the cost that people are most complaining about. Are you first John? Talking about housing affordability the people who are suffering most there are the homeless and the poor people in the financial market. What gets most of the discussion is home purchase affordability so can people afford to buy a home? That's the very difficult thing to do something about because to make a serious improvement in home purchase affordability you either need the price of homes to go down or at least for them to increase at a slower rate of the population own homes politicians are reluctant to do anything that is going to make house prices fall significantly. It is a difficult problem to address. Shirley? Just on the definition it's worth clarifying as Peter said the CPI numbers we look at do include rent and they include the cost of buying a house but it's a consumer index and not an asset price index so it does exclude existing home purchases because the main component there is land which is an asset. I agree completely with John that actually when we think about housing affordability the policy focus really should be on those that can't afford any sort of home and that group certainly in Melbourne it looks like it's growing and that's a more significant social problem than people being able to afford to buy a home although that's a concern as well. It is complex though and there's so many factors involved in home ownership rates but the pricing's just really gotten out of hand and it's a difficult one to put a lid on now that it's out of the box again. Final question from Avis Williamson should an incoming government control prices? We used to have price control we've certainly had it at the state level and we've had to control the price of bread very effectively, bakers still produce bread sliced white loaves at the required price and no more they made their money on the sourdough and other things. South Australia had price controls for years might the best way to control prices to you first John be to control prices by legislation I think the evidence is moving to some sort of controlled economy allow the former Soviet Union is probably not desirable on I'm not sure that New South Wales in the RAN years or South Australia in the Dunstan years was Soviet Union but continue. If you only control one or two prices that's not going to have much impact on the total inflation rate and the problem tends to be if you control the price to low people just won't supply that good so the bakers will make cross ons but they won't make loads of bread if they can't charge more than a certain price. They use bread in New South Wales as someone who was regulating them they use bread as the gateway drug or the loss leader they were sort of happy to because it was quite fair for them in the sense that they had to put on those last white loafs and then they put their more expensive offerings next to it but I see your point Julie. Look I don't think inflation's got to the point where we need to look at that kind of thing we're only talking about a couple of quarters of high inflation at the moment and remember this is coming off a period where we had inflation. Prices fell in 2020 and we have had a lot of disruption a lot of what we're saying particularly if I look through the groups the factors affecting food and grocery prices the factors affecting construction they're all temporary so jumping to a really hard permanent measure like price fixing really isn't necessary. John and I'll ask you to sort of conclude on this note John we'll take that as your conclusion Julie will this pass as Julie is suggesting and I note that the Melbourne Institute's inflation gauge this is something it does every month the Bureau does something every quarter showed that in April aggregate price increases added up accounted to zero so we either had a pause for a month or there's a sign that while some prices are rising some are now also coming down do you see this as a blip or as moving up to a new step some of the things which have pushed price up in the last year are not going to recur over the next year so I think it's very unlikely that global oil prices will increase as much over the next year as they have over the past year for example they're more likely to fall back if anything similarly some of the distortions due to the government measures to address COVID they'll drop out of the figures over time some of the supply chain problems that have been caused by people being confined to a local government area or a state or something they'll get sort of sorted out so you should see quite a few of the things that have been pushing up price in the past year pass out of the system gradually over the next year that's all we have time for I hope that makes you feel better and I hope it comes to pass the odd thing is we wanted a bit of inflation the Reserve Bank felt the inflation was too low for so long and it's one of those cases that I don't wish too hard all things in moderation Peter well that's what the poor Governor of the Reserve Bank has been trying to do for nearly all of his term that began in 2016 he's had inflation lower than his target band and now he's got it higher so maybe he can fine tune things a bit more keep reading the conversation and other news sources for news about the cost of living we know that in a week's time we'll have news on wages three days before the election on Wednesday I think it's Wednesday the 18th the updated wages news comes out which will be for the March quarter so we can actually compare it with the fairly frightening news on prices thank you Julie, thank you John if you want to read more from John Hawkins he's looking up in the conversation he's one of our most prolific authors and looking him up is like an index of a guide to sort of explanations of the things that you might be most concerned about if you want to read more from Julie Toth I am thrilled that she has polled every six months in the Conversations Economic Survey these economists don't always get it right but at the risk of sharing data that I've shared with Julie and almost no one else in the decade or so that I've been doing this Julie's predictions happened to have been the most accurate so things are always a mixture of luck and skill but I would be if I were Julie I'd be prepared to claim that so you can read her there otherwise she works for clients at Mass Group so thank you so much for joining us and thank you so much for taking part in the Conversations Survey I think we learned a lot thank you