Former Reserve Bank board member and economist Warwick McKibbin has called for central banks to dump inflation targeting in favour of nominal income measuring, as the global economy enters a period of more frequent supply, climate, and commodity price shocks.
“We’re now in a world of enormous leverage by households and governments. The thing that is absolutely critical now is that we maintain high nominal growth during the process of deleveraging. The nominal growth rate is key, not the inflation rate.” The Reserve Bank’s latest forecasts, released on November 4, call for inflation to peak at 8 per cent in 2023
The US-based institutional adviser said he expects the world’s largest economy to enter a “very large” recession sparked by further rises in benchmark US 10-year Treasury rates.