Will Ken Henry and the Reserve Bank board raise interest
rates tomorrow after holding them at 5.5% since March 2005? We won’t know
the answer until 9.30am tomorrow but, until then,
here’s what Australia’s
top economists, analysts and business commentators think.

John Edwards – HSBC Bank chief economist
The federal Budget looms just a week later and the
central bank has not warned of such a politically sensitive move – “Rates have
been increased in May in other years but this has always been flagged a long
time beforehand.”

Shane Oliver – AMP chief economist
Growth has been off a very soft patch late last year, while hikes
at the petrol pump have already had the effect of a 0.25% rise in rates.

Steve Ryan
– St George Bank chief economist
“There have been signs of a pick-up in January and February
but this is far from the strength of business growth that would require a
tightening in interest rates.”

Peter Vaughan – Business SA chief executive officer
“Right here, right now, there’s no convincing evidence that
the Reserve Bank should be acting to curb inflation just yet.”

Bill Evans – Westpac chief economist
“We do not think the inflation numbers are strong enough to
justify a pre-emptive move.”

Alan Kohler
“It won’t happen because, there can’t be a rate hike next
week. Awkward politics is the least of the reasons… More likely is that the RBA
directors will think about it, tell Ken Henry to keep the Government’s
intentions on fiscal policy to himself, and do nothing.”

Paul Braddick – ANZ head
of financial system analysis
“The RBA will be watching
for any reacceleration of household credit and we continue to expect a further hike
in interest rates in the second half of the year.”

Brian Redican – Macquarie Bank’s senior economist
“We think it’s probably more sensible for the Reserve Bank
to sit back, analyse the situation for another couple of weeks, and maybe think
about raising rates in the second half of the year.”

Craig James – Commonwealth Bank chief equities economist
“Later in the year, the Reserve Bank may need to tap the
brakes by increasing interest rates. The justification isn’t there now.”

Saul Eslake – ANZ chief economist
“There’s been a remarkable shift in
opinion but there is still no sign yet that petrol is feeding into
underlying prices. I think it will start to happen later this year
and that’s when I expect rates will rise.”

Kieran Davies – ABN Amro chief economist

“The Reserve seems to be indirectly signalling it plans to
hike so I expect it will do.”

Alan Oster – NAB chief economist
“The risk in delaying a rate hike now is that a
more severe tightening of (interest rates) might be needed later… There is now
clear evidence that the RBA needs to act to
temper domestic demand growth.”

Matthew Drennan – Zurich Financial Services investment
“If I was Ian Macfarlane (and was stepping down on 17
September), I would be taking out some insurance at this stage… He doesn’t want
to retire and be seen to be handing over a problem.”

Greg Gibbs – ABN Amro currency
“It is very likely the Reserve Bank will raise rates next
week… It isn’t fully priced in yet so the Australian dollar will continue to

Terry McCrannHerald
“When push comes to final shove, (Macfarlane)
will (increase the official rate by 0.25%)… Because when you sift through all
the conflicting evidence and the complex mix of uncertainties, the primary
responsibility of Macfarlane and his board is to not let the inflation genie
out of the bottle.”

Tim ColebatchAge/SMH
“There is potential for inflation to rise, as economic good
times erode resistance to price rises. If that’s how the Reserve board sees it,
then it would make economic sense to move early – and political sense to move
before the May 9 budget, lest it look like a budget critique.”

Tony Meer – Deutsche Bank analyst
“The Bank can relatively easily make the case for a further
dab on the brakes in May if it so chooses and history reminds that more often
than not, the Bank moves once it can make the case.”