We can recall no time in Australia’s post-war experience when the economic outlook has apparently changed so quickly. The change is generated by belated recognition of domestic imbalances. It does not concern the international outlook. The twin engines of global growth, the USA and China, are both performing strongly. The price of oil is high and has again set a new record, at least in nominal terms. When adjusted for inflation, oil is still cheap and the expectation of higher prices to come seems to be widely shared and not especially worrying.

If there is no rate rise announced tomorrow, you’ll know that the governor of the Reserve Bank has been rolled. You can also factor in a distinctly greater chance – at least 50% – of an old-fashioned crisis later in the year as the Australian dollar dives and inflation climbs.

Even with a rate hike tomorrow, at least two further 25 basis point increases will be needed, although there may well be a pause to allow clear water for the federal budget.

Yesterday’s TD Securities-Melbourne Institute estimate of consumer price inflation was the final nail in the case for a rate rise, implying as it did a rise of around 1% in the March quarter, representing a substantial acceleration of inflation. Read more here.