The big story today is the Reserve Bank’s decision not to raise interest rates. Fairfax’s Stephen Bartholomeusz says that either the Reserve Bank made an error of judgment last month or “we should be fearful of the implications of its decision not to raise official interest rates again.”

In the Fin Review, Bob Schwartz, chief economist at property and retail analyst firm Dimasi Strategic Research, says the decision is basically an admission that the RBA got the timing of its last rate rise “dreadfully wrong”. So “instead of just looking like a schmuck, like it did last month, the bank now looks like a schmuck with egg on its face.” But the Fin’s economic editor, Alan Mitchell, says the decision to keep the rates on hold doesn’t mean the RBA was wrong to raise them last month — it just means that the bank is “uncertain about the present strength of the economy – in particular, how consumers and business have reacted to last month’s rise.” And the AFR editorial says that the “RBA’s one sentence statement left us in the dark. How strong is the economy and what’s happened to the capacity complaints the bank fretted about last month? Monetary policy may be more art than science but it’s not Greek mythology.”

Robert Gottliebsen in The Australian says the RBA made the right decision because in the current economic environment “an interest rate increase was very dangerous even though the headline figures on labour, debt and productivity clearly tempted the Reserve Bank board to take the risk.”

The Age’s Malcolm Maiden says evidence that consumer confidence was deeply affected by the first rate rise – a record 17% fall in the Westpac-Melbourne Institute Index of Consumer Confidence – was the reason why the bank’s board has decided to sit on its hands for a while. And News Ltd’s Terry McCrann warns John Howard to be careful what he wishes for. The PM got what he wanted yesterday, but he’ll look silly “if the RBA now hikes just before the budget. Or indeed the month after. The Opposition would seize that stick and belt Howard and Treasurer Costello around the head.”

Meanwhile, The Oz reports that two Reserve Bank board members have made rare public comments, flagging the possibility of a rate rise at the next board meeting on 3 May – a week before the federal budget – if the consumer price index published later this month is too high.

In other news, the SMHreports that Pope John Paul II’s successor will not just face falling church attendance and an aging priesthood, he also has to find new revenue to balance the Vatican’s budget. The Vatican’s financial statements show the Holy See, the church’s central administrative body, ran deficits in the three years to 2003. A separate budget for Vatican City, the independent papal state in Rome, was also in the red in 2003.

And on, under the heading ‘Is Buffett in Trouble?’ Daniel Gross writes: “It’s hard to think of a business less exciting than insurance (well, maybe accounting). But in the last two weeks, a scandal in the sleepy industry has grabbed front-page headlines, destroyed the career of one American business giant, and now may tarnish the good name of another.”

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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