No reason for inflation panic. It’s not the real thing as far as the Reserve Bank and financial markets are concerned but nevertheless the producer price index figures out from the Australian Bureau of Statistics this morning are a clear pointer that inflationary pressures from a recovering Australian economy have not yet begun.
Final producer prices increased by just 0.1% in the September quarter to give an annual rise of 0.2% through the year. The index for intermediate and primary state commodities fell by 0.6% and 0.5% respectively in the September quarter for annual price falls of 4.9% and 7.5% throughout the year.
With low numbers like these for producer prices it would be surprising if the consumer price index figures due out on Wednesday told a different inflationary story. The news agency AAP reports that its survey of 12 business economists suggests that the CPI figure will show an increase of 0.9% in the September quarter to give an annual rate of 1.2%. If the figure does turn out to be that high then the market is probably correct in thinking that a 0.25% increase in interest rates is likely to be made by the Reserve Bank on Melbourne Cup Day. Such a rise is the most probably outcome on the Crikey November Interest Rate Indicator.
For my part I’m inclined not to go along with the herd and will risk a little of my own hard earned and back the no change option in the expectation that the CPI number will be close to the producer figure and that the Reserve Bank Board will thus allow itself to be influenced by the indications that the world economy has a long way to go before fully recovering and that rises in Australian unemployment, especially in the manufacturing industries, will do the job of dampening consumer enthusiasm.
An early happy birthday. The big day is Thursday when Asterix the Gaul turns 50. The French cartoon character was born on 29 October 1959 in the pages of the first issue of the weekly magazine Pilote. To mark the occasion there is a special new Asterix and Obelisk edition on sale throughout the world. In Paris the event is being celebrated with concerts, exhibitions, artwork and even an acrobatic display by elite fighter pilots from the French air force.
Voters get older and participants get younger. An intriguing aspect of Western democracies: as the voters on average get older, the participants seem to be getting younger. The Bagehot column in the latest issue of The Economist draws attention to the new dominance in political advisory positions of callow youths. He could just as easily have been writing about the position in Australia where the gap between finishing university and advising politicians how to run the country has got very narrow indeed. In some ways surely it would be more appropriate if people like Peter Costello and Brendan Nelson were entering politics at their age rather than leaving it.