Sally Auld says that Australia is “playing with fire” by being inflation-tolerant

Sally Auld, director of investments at JBWere Ltd said that the central bank of Australia is signaling a higher tolerance for inflation, which is very risky. These are attempts to slow the growth of policy tightening and to provide a soft landing.

This quarter, inflation is projected to peak at 8% and is not expected to return to the target level of 2-3% set by the Reserve Bank of Australia (RBA) until 2025. Consequently, the RBA is raising interest rates by a quarter of a percentage point and is prepared to pause for an assessment of its actions.

On Thursday, Auld moderated a group of economists at the Australian Asset-Backed Securities Forum in Sydney. There she expressed her opinion, saying Australia is "playing with fire".

The RBA was the first to slow the rate of tightening. Governor Philip Lowe is confident in the ability to slow consumer prices, keeping the economy from going into recession. He compares wage growth and inflation expectations to those in the U.S. and the U.K., saying that in Australia they are still contained and low.