Beware the good cop/bad cop routine that we think is being played by central characters at Australia’s Reserve Bank. The Governor Ian Macfarlane has played the role of the good cop.

The role of bad cop falls to the Governor’s Deputy, Glenn Stevens. He is speaking on October 11 to a business audience in a Tasmanian casino. In this tag-team act, he will have to take the facts of continuing strong global growth from Mr Macfarlane’s speech and discuss the Australian implications. Resource booms cause longer-run trouble as they cause short-term joy, such as our current nirvana economy, and usually end in tears.

“…we expect bad cop, Glenn Stevens, to make the case for an interest rate increase, with the actual move more likely after the mid-November Monetary Policy Statement than before. Does it really matter that this renewal of the tightening cycle is coming a few months late? At the margin, yes. It would be better for the containment of inflation if the first rise came earlier.”

This month Henry Thornton moves from telling the Reserve Bank what it should do to predicting what it will do. Read the full article here.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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