Inflation will be back in the news this week as the March quarter consumer price index (CPI) gets released.
Some expert has opined that the tipping point for the Reserve is “underlying” CPI of 0.7 of one per cent. Above this, interest rates rise, below this they will remain unchanged.
There are two ominous portents – the Melbourne Institute inflation expectations index is up, and likewise the TD Securities monthly index of consumer inflation. But, of course, this inflation number is not the whole story. Importantly, most domestic activity indications – jobs growth, credit growth, consumer spending, investment spending and above all the terms of trade are all strong to booming.
Both sides of this debate have not yet focused on the coming drought-led food price inflation which, if the PM’s prayer group’s pleas are not answered more or less immediately, shall become a far bigger issue than cyclone Larry’s banana price inflation.
One key issue is whether or not a flood (pardon!) of relevant imports is allowed, as was not the case with overseas bananas (a cabinet minister once told Henry: “The trouble with imports is that they mostly come from overseas”).
We will present the CPI data tomorrow with our commentary as soon as it is released.
The IR battle is hotting up. Peak business groups plan to fight back in an effort to match Kevin Rudd’s Rollback. If business fights with ads like those presented on behalf of the unions during early morning world cup viewing, it will be fun to see business stereotyping of union bosses similar to those ACTU gems showing actors pretending to be vicious anti-worker capitalist swine. Perfect material for students studying the history of IR, circa 1950.
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