It’s beginning to look a lot like a rate cut …
As Glenn Dyer and Bernard Keane write today, today’s remarkably low March quarter inflation result from the ABS confirms it. The annual rate fell to 1.6%, down sharply from the 3.1% for all of 2011. But what about rate cuts later in the year? Forget the ABS, Europe is where you’ll find answers on that front — and a perfect storm is brewing.
Charles Richardson reports today on the collapse yesterday of the Netherlands government — spun mainly as a story about differences on how to deal with Europe’s economic troubles but, as Richardson writes, it also illustrates the problematic role of the far right in European politics.
These competing challenges for European governments such as France and the Netherlands mean that “whatever the intrinsic merits of austerity, the political priority is for the mainstream parties to re-establish a consensus on economic policy that is acceptable to the electorate, for fear of giving more traction to the extremists. In the Netherlands, that probably means that some of the hard edges of Rutte’s package will need to be softened.”
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Cue nervous world markets.
Since late last year, the RBA has indicated Europe is the biggest external threat to the Australian economy. Worries eased slightly in the first quarter thanks to the European Central Bank’s two rounds of three-year loans to banks across Europe, but the shadow never really passed. Now we’re witnessing the austerity plans for Europe being rejected by voters and hard-right and left-wing politicians alike.
It’s this ripple effect that still remains the biggest factor when it comes to cutting rates back home. Start reading the front pages of all good European rags very, very closely.