More help for victims of the big dry. “Today the cabinet is set to approve declaring another 50 drought-afflicted areas eligible for assistance”, reports The SMH

Tim Colebatch notes: “John Howard, now rethinking his own policies on global warming, might marvel at his European mates saying they must do far more. While Europe has pledged to cut its greenhouse gas emissions by 8% between 1990 and 2010 – and insists it will meet the target, though others are sceptical – Australia has pledged only to hold its growth in emissions to 8%”.

The difficult policy issue is how to help those who have a future on the land while helping those who should leave to leave.

Yesterday’s larger than expected PPI rise has got the hares running – in many cases very late – on the next rate hike.

David Uren, for example: “Business is suffering higher costs and is increasingly passing them on to retailers, strengthening the case for another interest rate increase next month. Wholesale prices have risen faster over the past six months than at any time in the past six years”.

Henry’s special correspondent, Stephen Koukoulas, reported in from a visit to the USA: “I am very worried about inflation and the risks favour a 6.5% cash rate in Q1 2007. This is huge politically – harder to give tax cuts and opens the door for Labor in those dozens of mortgage belt seats”.

Stephen’s excellent analysis last quarter, reported here, helped turn the debate.

Henry quotes from the ABS release – read this carefully at least twice and be nervous, be really nervous.

Each of the three stages of the production indexes increased in the September quarter 2006, with the preliminary (Stage 1) index showing the largest rise of 1.7%, followed by an increase of 1.3% for the intermediate (Stage 2) index, and an increase of 1.0% for the final (Stage 3) index. Through the year to September quarter 2006, the preliminary (Stage 1) index increased by 7.7%, followed by an increase of 6.7% for the intermediate (Stage 2) index and an increase of 4.0% for the final (Stage 3) index.

Read more at Henry Thornton.