The risk of a prolonged period of high inflation and interest rates with weak growth is being overlooked by buoyant equity markets, setting the scene for nasty surprises if these risks come home to roost, some of the country’s top investors say.

James Aitken, an advisor to some of the world’s largest asset managers, said it was hard to imagine the Reserve Bank could tame Australia’s near 7 per cent inflation with a peak real cash rate of “minus 300 basis points” when historically it had taken “peak real policy rates” to bring inflation back down to the central bank target bands.