Wages aren’t a key driver of inflation in Australia so far but demand is, which is a big reason why the RBA is lifting rates so quickly. While we think annual inflation will slow through next year, we think it's going to take quite a while to come down and get back within the RBA's target band of 2 to 3 per cent.
Globally and domestically, there have been some shifts in the drivers of inflation. For example, if we're past the peak in globalisation with more barriers to movement of goods, services and people around the world, that's inflationary.
After several years of businesses focussing on efficiency and driving down costs, we’re seeing them start to think more about building resiliency into their operations and their supply chains – mainly in response to the shocks we've seen in the form of bushfires, floods, COVID and the invasion of Ukraine. Increasingly we’re also seeing businesses pass on their cost rises to consumers.
Global supply chain pressure index