Hiking rates is such a blunt instrument. There are other, better ways to target inflation

March 17, 2026 — 2:36pm

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Australian workers are bracing for impact as the Reserve Bank of Australia hiked interest rates on Tuesday, under conditions of high oil prices and threats of a wartime inflation surge. But is there another way to curb inflation that doesn’t force the same stretched households to cut back on spending?

Contagion from an oil crisis is vast, raising prices for fuel, shipping, transportation, manufacturing, agriculture and aviation. Generalised higher prices for energy flow into all production costs. Business then pass higher costs onto consumers in higher prices, protecting profit margins.

But they also tend to do another thing: leverage their powerful position in supply chains to exploit the crisis and widen profit margins. This happened after COVID when “seller’s inflation” saw large corporations increase prices beyond rises in their own production costs. Then it’s a double hit for workers, who pay more for expensive essentials and higher interest on their borrowings.

Treasury has predicted inflation to rise a full percentage point this year into the high-4’s if oil prices average $US120 per barrel for the next three months. In turn, some big banks and corporate economists are frothing for a 1970s-esque “Volcker shock”, calling on the RBA........

© Brisbane Times