The whole purpose of cutting the rate at this point in time is to keep inflation within the target band of around 2-3%
The Reserve Bank (and the economy as a whole) needs to have some amount of inflation. If for example there was 0% inflation or deflation (-%) people would hoard cash as the buying power of their money would increase over time and this would slow the economy as less goods would be produced as there is less demand.
By keeping inflation around 2-3% the RBA is encouraging you to not hold money as cash as it’s value is slowly eroded over time (see velocity of money for related info) this makes you spend it now (this is good for the economy).
Wages are related but also independent of these factors to some extent. You could have a 20% wage increase and not impact inflation or make it rise significantly.
less goods would be produced as there is less demand
So that’s a bad thing?
From a capitalist/profit point of view I can see it is, but isn’t it good for everyone?
Like having less cars on the streets. That’s probably bad for profits, but good for everyone. Though I guess humanity is still very far from a point where people in power would be able to see it that way.
The whole purpose of cutting the rate at this point in time is to keep inflation within the target band of around 2-3%
The Reserve Bank (and the economy as a whole) needs to have some amount of inflation. If for example there was 0% inflation or deflation (-%) people would hoard cash as the buying power of their money would increase over time and this would slow the economy as less goods would be produced as there is less demand.
By keeping inflation around 2-3% the RBA is encouraging you to not hold money as cash as it’s value is slowly eroded over time (see velocity of money for related info) this makes you spend it now (this is good for the economy).
Wages are related but also independent of these factors to some extent. You could have a 20% wage increase and not impact inflation or make it rise significantly.
From a capitalist/profit point of view I can see it is, but isn’t it good for everyone?
Like having less cars on the streets. That’s probably bad for profits, but good for everyone. Though I guess humanity is still very far from a point where people in power would be able to see it that way.
Yes, in reality, less consumption is a very good thing.
In capitalism less consumption is an existential threat and cannot be tolerated.