Mysterious Demise of the Phillips Curve Is Weirdest in Australia
- Breakdown of jobs-inflation dynamic more obvious in Australia
- RBA Governor suggests technology, globalization as key factors
Photographer: Cole Bennetts/Bloomberg
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The traditional relationship between inflation and employment has faltered in much of the developed world -- nowhere more so than in Australia where it’s seen an unprecedented breakdown in the past few years.
The Phillips Curve suggests tight labor markets should force firms to raise wages, and they in turn raise product prices to cover the costs. That means low unemployment should result in faster inflation, or so the theory goes.