So the truth is out. Interest rates are about to rise and the Government’s biggest gun – no, I’m not joking – has announced it to an unsuspecting petrol-paying public.

What has been blindingly obvious for a year or more is about to come true. The boom in the resource states is overwhelming the bad times in the latte-society states. The housing bust is not restraining the economy sufficiently; the exchange rate has been too low in the face of such extraordinarily favourable terms of trade; the labour market has been too tight for too long; and high and higher oil prices have been too high for too long and are leaking into wage rises.

Did you hear this from the Prime Minister? No, he was too busy this week showing that he wouldn’t know a decent AFL team if he saw one. Did you hear this from the Treasurer? No, he has given up being the bearer of bad news. He is much too busy broadening his appeal for such negativity. Soft options now tickle his fancy, not the hard stuff.

So who is the new big gun? Mal Brough of course. Who? Apparently he is the Treasurer’s latest underassistant. I heard him clearly brief ABC 702 radio listeners this morning. To this observer of the economic discourse, it must be really bad news when those who have boasted most of their incredibly astute economic management so patently duck for cover.

Read Alex Erskine’s full article here.

Meanwhile, Monetary Policy is featuring in the international news as well. Reuters poses the question, “who should run the world?”, while The Economist provides an excellent report on the fancy footwork underway in central banks around the world to get the monetary policy balance right in the shadow of hurricanes, rising oil prices and asset inflation.

Henry’s take is here.

Peter Fray

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