This is Armchair Economics with Hamish McRae, a subscriber-only newsletter from i. If you’d like to get this direct to your inbox, every single week, you can sign up here.
So we get a new government this week. What will it mean in practical terms for our finances? Will we get cheaper mortgages? Will there be more jobs? What will happen to pensions? And inflation? Will real pay, climbing at last, keep rising? In short, what difference will it make?
Huge questions, and ones to which the answers are really as much about the world economy as they are about politicians’ proposed policies.
But there is a place to start, one that will be the base on which our next government can build. It is that we, and the other advanced economies, are basically through the twin disasters of the pandemic and the surge in inflation.
Both have saddled us with huge costs. You can’t shut down large chunks of the world economy for months without a hit to living standards, for we all in one way or another have to pay for the loss of output. And the surge in inflation has disrupted everyone’s finances, with some gainers and a lot more losers.
But now that is mostly past. In as far as we can be sure of anything, the world economic cycle is turning up and if it conforms to past patterns there should be several years of reasonable growth.
Inflation is moving towards acceptable levels, and central banks around the world are all either cutting interest rates or about to do so. Here in the UK the issues are whether rates start to come down in August or September, and at what level they settle in a year or two’s time. Headline inflation here in May was already down to the target 2 per cent and may well have dipped below it in June.
This gives a stability that we have not had since before the pandemic. Simon........