This paper follows a previous NSW Treasury paper on global supply chains.
Inflationary pressures are expected to subside in 2023 as the COVID pandemic eases its grip, supply chain disruptions ease, monetary policy tightens, and demand rebalances away from goods-intensive consumption towards services.
A return to pre-COVID levels of participation would ease labour shortages, especially in the services and transportation sectors, further helping to alleviate inflationary pressures.
There are, however, several risks around this view, not least the current military conflict in Europe and China's continued adherence to a zero-COVID strategy.
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