The Reserve Bank is about to embark again on what appears to be a major selling program as inflation and interest rates resume their historic relationship in the minds and forecasts of the central bank.

Already this month, two senior officials, governor Glenn Stevens and his economic deputy Phil Lowe, have made forays into the public arena.

This has been since the rate rise at the October RBA board meeting, the minutes for which were released last week.

There will be nine other occasions between this week and November 18 where the bank or a senior official, led by Stevens, will be in a position to either speak, make a comment on a panel or in answer to a question or make a major written statement.

All up there have been a dozen public statements or appearances from the RBA since the October board meeting decision which saw the RBA switch tack and start pushing up rates. The last time there was a group of RBA speeches and releases was in July and early August. Stevens made a speech in late July in which he issued his first words of concern about the impact of housing shortages and rising prices might have, and how the central bank would move quickly to control them.

This revealed the bank’s changing view of the slowdown and the impending recovery that was later confirmed with news of solid positive growth in the June quarter and in the 2009 financial year.

Now another occasion for a rate rise arrives tomorrow week. Some economists are tipping a rise of 0.50%, especially if this week’s inflation figures are not as low as hoped. At the November board meeting in 2008, the RBA cut rates by 0.75 % to 5.25%, and then cut again in December by 1%.

From November 3 and including the post-meeting statement onwards, the bank and its senior staff will have eight occasions on which to explain or amplify whatever rate rise comes the meeting that morning.

But first, on Wednesday of this week Malcolm Edey speaks in Sydney on the topic The Evolving Financial Situation.

On November 3, the RBA board meets and is expected to reveal another rate rise in the post-meeting statement from Stevens. It will be well viewed online and will have us pawing the ground to be Efficient, but without resorting to an Alcopop.

Two days later Stevens makes his second sortie into the public area in Melbourne with a major set piece speech entitled The Road to Prosperity.

A day after that, one of the bank’s major set piece statement will be released in the shape of the fourth Statement of Monetary Policy (SMP) for 2009.

This will contain the bank’s new inflation and economic-growth forecasts. This statement will lay down the bank’s thing on monetary policy for 2010 and beyond (And 2010 is an election year federally).

A few hours after that’s released at 11.30am, deputy governor Ric Battellino finds himself as a panel member at a financial conference in Perth at the unlikely venue of the third annual Australian Parliamentary Conference. His appearance will no doubt lead to news services, radio and TV attending and asking about the forecasts in the SMP. The timing could be coincidental, but the RBA would have noted the timing of Battellino’s appearance and that no doubt will be used to amplify the message in the SMP.

Continuing this breakneck pace, Phil Lowe, the bank’s head of economics, makes his second public appearance in a month in Perth as well on the following Monday. In both cases questions are usually fired at the RBA member on the panel, often to the exclusion of others there to discuss and answer queries.

On November 10 John Broadbent, the bank’s head of domestic markets, makes a rare appearance with a speech entitled Reconnecting Corporate Australia with Frozen Credit Markets Through Sound Policy Initiatives. Fascinating.

On November 17 the minutes of the November 3 meeting will be released. By then they should be a bit redundant given the speeches and the appearance of the SMP before then.

And then on November 18, Guy Debelle, the assistant governor in charge of financial markets, reappears in public with a speech entitled Whither Securitisation. That sounds boring, but the securitisation markets are still not completely unblocked and until that happens and investors recovery confidence, the powerful hold the Big Four banks have on things like home and business loans, can’t be broken.

But before all that we have the Producer Price and Consumer Price Inflation figures for the September quarter.

Wednesday’s CPI numbers is expected to show a slight easing in the quarterly rate to less than 1% (The AMP’s Dr Shane Oliver has forecast a rise of 0.6%) and an annual rate of close to 1%. Friday also sees figures from the bank on private credit growth for Australia for October.


The six month trend of falling producer prices came to an end in the September quarter, as domestic price pressures on business and industry rose, something that will add to the Reserve Bank’s belief that emerging inflationary pressures are the biggest danger to the recovery.

Figures today from the Australian Bureau of Statistics revealed that producer prices at the final stage rose 0.1% in the September quarter, after falling in the June and March quarters. They were up a small 0.2% in the 12 months to September, but that was more due to the high cost June quarter of 2008 dropping out of the comparison.

Now, producer prices are not directly translated into the Consumer Price Index, out on Wednesday — they form more of an indicator of price trends and pressures on business costs and prices. But the detail of the figures and the reasons given for the rise by the ABS will be what worries the RBA.

The ABS said the rise in the quarter was “mainly due to price increases in electricity, gas and water (+12.1%), bakery product manufacturing (+10.4%) and petroleum refining (+6.0%).”

It was “partially offset by price decreases in computer services (-7.1%) and industrial machinery and equipment manufacturing (-5.0%).”

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Peter Fray
Peter Fray
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