New Delhi: Around the world, households and businesses are feeling the effects of the rising cost of living. Local academic experts have been contacted by editors from across The Conversation's global network to discuss how their nations and regions are addressing this issue as well as the price and interest rate outlook for their locales in 2023. 

United Kingdom: The UK's cost of living crisis may initially appear to be relatively minor in comparison to other nations. In comparison to 12.6% in Italy, 16.% in Poland, and over 20% in Hungary and Estonia, its inflation rate in November 2022 was 10.7%. However, the Bank of England predicts a recession in the UK this year that could last until the middle of 2024.

This is due to the UK's unusually high proportion of households without protection against financial hardships. According to a pre-pandemic survey, 3 million people in the UK would become impoverished if they missed even one pay check, with the high cost of housing in the nation serving as a significant source of vulnerability. Another recent study claimed that if costs increased, one-third of UK adults would struggle.

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Over 4 million households added to their debt during the pandemic, and nearly as many fell behind on payments. Additionally, recent increases in food and energy prices will put many people over the edge, particularly if heating costs continue to rise after the current government cap on energy prices expires in April.

Since 2010, UK governments have been covertly raising taxes, and after accounting for inflation, the average household income in the country was 2% lower in 2018 than it was in 2007. However, since the UK's inflation rate of 10.7% (as of November) is significantly higher than the pay increases many workers have had to accept lately, real incomes have been further eroded over the past year.

However, current events have compelled the government to take actions that may not have been in line with the impending recession. Liz Truss, who was elected prime minister in September 2022, made audacious promises to reverse the UK's economic woes. Her plans to cut taxes received a sharp response from the world's financial markets, who increased the borrowing costs for the UK government and businesses. This compelled Jeremy Hunt, the newly appointed chancellor, to start cutting public spending and raising taxes again in November. Normally, governments would not take such measures on the eve of a recession but rather at the height of a boom.

Additionally, the Bank of England is acting contrary to what other central banks prefer to do just before a downturn. Rates were forced up to 3.5% in December due to high inflation, and additional increases are anticipated in 2023. This increases debt repayments for the millions of people who borrowed money to purchase their homes, as well as for those who owe money on unsecured credit cards or overdrafts.

A household's disposable income is reduced by all of these additional expenses. And since household consumption accounts for nearly 60% of all expenditures in the UK economy, a recession will unavoidably result, one that may be both painful and protracted.

United states: In the US, inflation rose sharply in late 2021 and early 2022, reaching the highest levels in the previous 40 years. In an effort to stabilise prices, the Federal Reserve responded by aggressively raising its benchmark rate (the federal funds rate) seven times since March. In 2023, a few more modest increases are anticipated.

According to the US consumer price index, a widely used indicator of inflation, prices reached their peak in June 2022, rising by 9.1% from the previous year. The index has fallen each month since June, and the most recent data, from November, show that US prices are 7.1% higher than they were a year ago.

Other interest rates, like mortgage rates, are measured against the fed funds rate. Recent increases have started to lower investment, demand for goods and services. For instance, sales of existing homes fell over a third from a year ago and were 7.7% lower in November than in October. The fundamental cause is that mortgage interest rates, which were only 3% at the start of 2021, have more than doubled to over 6% after reaching 7% in October.

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Because some effects of monetary policy have a lag, the ripple effects of the decline in housing demand will continue to slow economic activity for months to come.

The Fed is currently indicating that it will keep raising interest rates through early 2023 before taking a break. This cautious stance is supported by a range of economic data. According to the most recent data, the labour market is still strong, with the unemployment rate remaining low, wages that haven't been adjusted for inflation continuing to rise, and roughly 10 million jobs still available. If employers must increase wages to entice or retain workers, this could result in higher prices and enduring inflation.

Given the US's ageing population's impact on the labour market, this issue is especially crucial. However, it is unlikely that the recent decline in energy prices will last.

Australia and New Zealand:  Top economists expect RBA to hold rates low in 2022 as real wages fall, according to The Conversation Australia's regular survey of economic forecasts, which was published at the beginning of 2022.

This prediction of the Reserve Bank of Australia's rate-setting strategy for 2022 was egregiously incorrect. The second part turned out to be fairly accurate: real wages did decline, though not because they continued to grow slowly as experts had predicted, but rather because the rate of inflation exploded and outpaced real wages' growth.

Australia's annual rate of inflation started 2022 at 3.5% but shot up to 5.1% in March after Russia invaded Ukraine and reached 7.3% for the year to September after mostly remaining within the Reserve Bank's target range of 2-3%. When the numbers are next updated in late January, the bank anticipates something in the neighbourhood of 8% for the year to December.

Similar circumstances occurred in Australia's neighbour New Zealand, where the inflation rate peaked at 7.3% before falling to 7.2%. But the way it has responded has been very different.

The Reserve Bank of New Zealand started raising rates much earlier and more aggressively than Australia's Reserve Bank, including a recent 0.75 point hike, even as it predicted a New Zealand recession. Australia's Reserve Bank raised its rate in eight discrete monthly steps beginning in May, either by 0.25 or 0.5 points.

A recession is not frequently predicted in Australia, unlike New Zealand, the US, the UK, and much of the rest of the developed world. This is largely due to the bank's restraint in the face of a three-decade high in inflation. Throughout the 29 years leading up to the COVID recession in 2020, Australia has done well with this strategy. After the global financial crisis of 2007–2008 and the "tech wreck" recession of 2001, which affected the US and a large portion of the rest of the world, the nation escaped the "Great Recession."

This moderation also reflects the authorities' conviction that a wage-price spiral is not developing in Australia. The stagnant 3.1% wage growth rate is far below the 7.4% rate in New Zealand.

And it appears that inflationary pressure is decreasing. Following Russia's invasion of Ukraine, global oil and wheat prices are down between 25 and 30 percent from mid-2022 peaks. According to the Reserve Bank, Australian inflation will begin to decline in 2023 and will eventually drop to 4.7% by the end of 2023 and 3.2% by the end of 2024, or almost back to its target range of 2-3%.

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The bank seeks to stay on the right side of history by adopting a less pessimistic stance than its international competitors.