Australia's consumer prices climbed 4.3% in the year to September, a rate no other advanced economy in the comparison set matches. The Reserve Bank has delivered its fifth rate hike for the year, and faster inflation is anticipated by year's end. For households carrying variable-rate mortgages, the squeeze is direct and immediate. Jonathan Kearns, chief economist at Challenger, puts it bluntly: "Our inflation problem is worse than in other countries, that is very clear." A survey of the eurozone, New Zealand, Canada, and comparable advanced economies confirms it — none are running at Australia's level. But the picture shifts when you account for the labour market. Australia's unemployment performance has been "much better than in New Zealand, Canada and in Europe," Kearns notes. Jobs are plentiful even as prices climb. This is the core tension: high inflation paired with low unemployment is a different kind of stress than high inflation paired with joblessness. Enter the misery index — a concept devised by American economist Arthur Okun in the 1970s, later weaponised in the 1976 presidential campaign. The formula is crude: add the unemployment rate to the inflation rate. By this measure, Australia drops from worst-in-class on inflation to middle-of-the-pack on overall economic pain. Countries with lower inflation but weaker labour markets converge to similar misery scores. The misery index is a blunt instrument, and its limitations are real. It weights a percentage point of unemployment the same as a percentage point of inflation, which ignores distributional effects entirely. A household with a secure job and a variable-rate mortgage experiences the current mix very differently from a renter whose wages are keeping pace. The index tells you something about the aggregate but almost nothing about who is actually suffering. The deeper question is whether the trade-off is sustainable. Rate hikes are the mechanism compressing inflation, but they work partly by weakening the labour market. RBA Governor Bullock's framing — "pain now" to prevent worse later — implicitly acknowledges that unemployment may have to rise to bring inflation down. If that happens, the misery index could worsen on both inputs simultaneously. For now, the data offers a genuine but limited consolation: Australia's inflation is the worst among peers, but its overall economic distress is not. Whether that distinction survives another year of rate hikes is the real question worth tracking.
