The rising inflation in Australia is becoming a deep problem. New economic data, in May 2008, shows that Australia's inflation is stemming from strong domestic demand, not from global pressures. Contributing to inflation in Australia has been the tight market as demand for labour, homes and infrastructure has outstripped supply. Australia has previously been cushioned from inflation by the flow of cheap goods from East Asia. This effect is diminishing, leading to rising prices and rising inflation. Some experts argue that the Reserve Bank of Australia will have to raise interest rates yet again, to stem inflation. Tony Meer, an economist with Deutsche Bank, argues that consumer spending in Australia will dwindle further as higher interest rates and living costs take their toll. It will feel like a recession to many householders, he noted.
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