Reported at www.rossgittins.com: Reserve Bank deputy governor Andrew Hauser highlights the complexities of the current economic environment, emphasizing the importance of human behaviour over formal economic models.

Ross Gittins argues that the recent inflation surge, attributed primarily to COVID-19 and geopolitical factors, also stems from psychological influences like herd behaviour among businesses in setting prices.

He suggests that businesses anticipated price increases and collectively raised prices once inflationary pressures emerged, creating a self-fulfilling prophecy, even as previous low inflation rates resulted from a fear of raising prices in a stable environment.