As ever, the PM has shown his political skills. He got the reshuffle out of the way to minimise distractions from the election year agenda he’ll outline at the National Press Club at lunchtime today. But he can’t duck the CPI issue.

The media coverage of the reshuffle has been good. The Fin’s headline says ‘PM shapes up for election’. The Australian goes for ‘Howard picks his poll team’, while the SMH does it bit of brownnosing with ‘PM unleashes firepower’.

But replacing lightweights with lightweights or moving them around (Malcolm Turnbull is the honorary exception here) begs comparison with shuffling deckchairs on the Titanic.

There’s been a sharp move in that other opinion survey – the betting markets. In the wake of the Rudd move to lead the ALP, Centrebet were offering $2.75 on a Labor win. The Coalition were a very tight $1.35.

In the last 24 hours, in light of the polls and the Cabinet reshuffle, Labor has come into an even $2.00 with the Coalition at $1.72. Allowing for the bookies margin, that’s about a 54% chance for the Coalition versus a 46% chance for Labor. This is as close as it has been in this Parliament.

The weight of money on Labor no doubt reflects the public opinion polls – but it may also be an acknowledgment that the brand new artillery the PM has brought to the front may have little ammunition to fire.

The PM’s been lucky with the other potential distraction, inflation. The quarterly rate of inflation fell in the three months to Christmas, surprising most economists. The fourth quarter CPI fell 0.1 per cent to be 3.3 per cent higher than 12 months earlier, down from 3.9 per cent in the year to September. Most economists expected a 0.2 per cent rise.

Yet inflation is still running above the Reserve’s inflation target of 2-3 per cent. The RBA’s own underlying inflation result will probably not spark a rate rise next month – but if Labor continued to poll strongly and rates rise, check the bookies’ odds then.

It could cruel the PM’s pitch from today – let alone offer some new challenges for the laziest Treasurer since Phillip Lynch.

Peter Fray

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