LINKS TO OTHER DIMENSIONS OF PROGRESS

Inflation is linked with almost all other indicators of economic progress. It affects the distribution of income and wealth, and hence the decisions of consumers and businesses. It also affects the external competitiveness of the economy. If rises in the prices of domestically produced goods are small relative to rises in the prices of overseas goods, Australia's international competitiveness improves, provided that nominal exchange rates do not appreciate in response. Improvements in productivity and increased competition in goods and services markets are thought to have contributed to the low inflation rates of the 1990s.