And when it comes to monetary policy, there’s one question that bedevils many of us: only one in four correctly identified that an increase in interest rates would lead to lower inflation.Yeah, economists.
In fact, most Australians believe higher rates will lead to higher inflation
Peter Rickards, manager of the RBA’s public education team, says that Australians have a strong understanding of economic issues that relate firmly to their lived experience...
But Rickards says the impact of higher interest rates on inflation is “quite complex”.
Most of us think more about the cost side of the equation: higher interest rates means higher business costs, which means firms have to raise their prices.
Economists, on the other hand, know that higher interest rates slow the economy and make it harder for firms to pass on those higher prices as fewer consumers come through the door.