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David Llewellyn-Smith November 8, 2025 - 7:01PM Share via Email Share on Facebook Share on Whatsapp Listen to this article Copied URL to clipboard ‘Disturbing’: RBA interest rate hold due to Labor’s mismanagement and spending Deputy Nationals Leader Kevin Hogan discusses the Reserve Bank holding interest rates and how it is the result of “government... How many economists does it take to change a light bulb? It takes one to change it and four to discuss how it could have been changed more efficiently. This is a version of the old joke about economists being more focused on theory than the real world. The Reserve Bank of Australia is a classic case in point today. The bank is increasingly focused on theoretical measures of macro performance that can lead to inflation, rather than the inflation that is pouring into its own building through the power sockets. This is a fantastically pointless exercise that threatens to repeat all of the macro-management mistakes made over the last three years. Copied URL to clipboard 'Understand the privilege': 26yo reveals buying problem A young homeowner has claimed that buying a place is actually a "scam" The RBA theory for why Australian inflation has rebounded over the last two quarters is that productivity is too weak, meaning growth is too strong for the supply side of the economy. In its textbook, this means that wages cannot grow very fast without causing inflation. This may or may not be true. It is simply not relevant to today’s inflationary circumstances. The RBA is worried about wage-push inflation as unemployment rises materially, with no end in sight, while the real cause of renewed inflation is a new gas and electricity bill shock that is preventing any such thing from happening because it damages demand. Wage growth and labour underemployment. Picture: Gerard Minack The practice If the RBA ever bothered to look out the window, or in this case, at its power bill, it might figure out that it is facing a bout of cost-push inflation that it can do nothing about with the blunt instrument of monetary policy. The bank is especially worried about dwelling construction and market services inflation. But the former is intensely gas and electricity price dependent, and the latter is less so but still exposed. The shock since the beginning of the year is huge, especially for electricity prices, which are up 37 per cent with more to come. Energy and the CPI. Picture: Supplied Gas and electricity combined make up about 5 per cent of the CPI. So, over the year, the shock will add roughly 2-5 per cent of the CPI. And we can add spillovers to that. In the September quarter, the shock CPI number was clearly driven by energy, with over half 1.3 per cent number down to a 0.68bps bill shock. The RBA trims some of this out for its core inflation number, but it cannot trim out the spillover effects in other sectors, which are material. Electricity prices have soared. Picture: iStock Is there a new Ukraine War happening? No. This particular shock is unique to Australia. When the Ukraine War struck 3.5 years ago, it delivered a global gas price shock, which was brought to Australia by the all-powerful East Coast gas export cartel. The Albanese government did nothing about it for a year before it finally acted in its short-term interest by installing power bill subsidies directly to retailers, so your bills dropped. They spent $5 billion on this over two years, then decided, post-election, to stop doing it, so households and businesses are only now feeling the full brunt of the Ukraine War electricity price hikes of three years ago. What is maddening about it for Australians is that Mr Albanese’s short-term politicking missed the opportunity to break the gas cartel and stop this inflation from happening at all, then and now. All he needed to do was install an East Coast gas reservation system like that operating in WA. It is easy to do either via controlling volumes of exports or via super profits taxes that make the rebates permanent. Alas, fear of blowback from the gas cartel paralysed the Albanese government. Australian wholesale gas prices, percentage change. Now the RBA is trying to pick up the pieces, but it’s also making a mess of it. This is cost-push inflation that monetary policy does not affect. By misdiagnosing it as wage-push inflation and leaving rates on hold at a level that limits economic growth, the RBA is suppressing households to make room for the gas cartel, even though the energy inflation is a one-off shock that will disappear via base effects through 2026. This means the RBA easing cycle is not over; it is only delayed. More Coverage ‘Vampire’ devices costing Aussies at home Andrew Hedgman Aussies overcharged $40m on electricity bills Blair Jackson It also means that the bank risks a much larger spike in unemployment than is necessary to bring inflation back into its target band. Hopefully, the Albanese government’s long-overdue gas market inquiry will finally break the stronghold of the cartel. History is not encouraging. More related stories NAB insider’s alleged role in $200m fraud A former NAB employee has been charged over his alleged role in a $200m fraud scheme that police say is among Australia’s largest financial fraud cases. Australian Economy True cost of crime to Australia revealed A new report has put a dollar figure on the cost of crime to the Australian economy, including billions lost to the illicit tobacco trade. Australian Culture Aussies aren’t embarrassed by this anymore The cost of living crisis has so much to answer for and this “embarrassing” new Gen Z trend really sums it up. Registration In The Know Quiz Newsletters Competitions Welcome to news.com.au Code of Conduct Help and Support General Feedback Advertise with us Standards of Practice Licensing & Reprints Our News Network The Daily Telegraph The Courier Mail Our Partners realestate.com.au CODE Sports A NOTE ABOUT RELEVANT ADVERTISING: We collect information about the content (including ads) you use across this site and use it to make both advertising and content more relevant to you on our network and other sites. Find out more about our policy and your choices, including how to opt-out.Sometimes our articles will try to help you find the right product at the right price. We may receive payment from third parties for publishing this content or when you make a purchase through the links on our sites. 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