Inflation is likely to become more volatile in the future as globalism retreats and climate shocks mount, requiring central banks to adjust interest rates more often, the Reserve Bank governor has said.
Factors that had dampened inflation were now in reverse. These include the rise of blocs that reduced the benefits of trade. Working-age populations in many nations, including lately China, were in decline, a shift that would dent output and demand.
Disruptions are also mounting globally as the climate heats up, fuelling wild weather.
The shift away from fossil fuels posed a fourth supply-side risk. Lowe noted investment in new sources of coal or gas had not risen in the wake of record prices. The existing energy kit was also depreciating quickly because of decommissioning or reduced spending as investments shifted to low-carbon sources.
GDP in the OECD eked out a 0.4% growth rate in the September quarter alone, extending the weak expansion pace for the past three-quarters. The US was one nation to buck the trend, advancing 0.6% after two quarters of contraction.
For Australia, GDP growth will be 4% in 2022 before halving to 1.9% next year and slowing further to 1.6% in 2024, the OECD said.
