Inflation, productivity and wages: what is the link?
The Reserve Bank of Australia has made a number of statements about productivity in discussing monetary policy decisions. But is the relationship between inflation and productivity well understood? Why does the RBA need to consider productivity as well as wages when deciding whether to raise interest rates? In a longer term perspective, what is the link between real wages and productivity, and do economists think that relationship is as strong as it was? And if productivity plays such an important role, what can be done in the short and medium term to raise productivity?
Speaking on this topic were panellists Luci Ellis (Chief Economist, Westpac Group), Benjamin Mitra-Kahn (Assistant Commissioner of Inquiries and Research, Productivity Commission), and Professor Ian Harper (recently retired from his role as Dean of Melbourne Business School, and member of the RBA Board). The session was chaired by ESA National President, Catherine de Fontenay.
