If our economy is "booming" then why is Australia having to fight so hard to keep inflation in check??
Apparently
thanks to mining and other things Australia is making alot of money.
So why then are we having huge problems with inflation and raising
interest rates every 3 months??
I don't get it? are we damed if we do and damned if we don't?
is it a case of either we just coast and not make any money as a country
and thus keep inflation in check. or have a booming economy and have
inflation kick us square in the nads?
I don't know much about economics so if someone could please explain
that'd be great.
Economics - 1 Answers
Random Answers, Critics, Comments, Opinions :
1 :
Australia
has inflation just because it is booming.
There are several causes of inflation and a booming economy can have
many of them.
http://en.wikipedia.org/wiki/Inflation
One cause of inflation is an increase in the money supply. If people
have more money but there isn't a lot more to buy, then prices will go
up as people are willing to pay more than they were for the same goods.
This kind of inflation is the common result of a windfall of some sort,
such as high oil prices for countries such as Russia, Venezuela, etc. A
classic example is when the Spanish brought all that gold and silver
from "the New World" back to Europe.
http://www.sjsu.edu/faculty/watkins/spgold.htm
Another kind of inflation is called cost push. Sometimes the higher
costs are caused by an outside event (such as the "oil shocks"), but it
can also be caused by an economy which is so hot that it is hard finding
enough workers.
To attract workers, companies have to offer more, raising costs, and
causing inflation. Economists speak of the "Non-Accelerating Inflation
Rate of Unemployment" in attempting to formalize this idea (though no
one actually knows how to compute the NAIRU or even how constant it is.)
http://en.wikipedia.org/wiki/NAIRU
As for "damed if we do and damned if we don't", what else is new?
Everything else in life has to be done in a balanced way, why not the
economy? Is eating too much good for you? What about not eating enough?
Ditto for exercising, working, etc.
Also, remember all those stories about getting what you wish for and how
badly they all turn out? (Every culture has at least one. The classic
Greek story was Midas and his golden touch.) They are there to warn you.
Be careful what you wish for.
