Reserve should get on with making rates 'average'

Consumer price inflation is estimated in the year to either January or February at 4.8 per cent, 7.2 per cent, 16.1 per cent and 2.7 per cent.

Other measures of inflation, including unofficial measures, are higher and, in the case of China, the government is applying the brakes. China has a heavily managed currency and is facing with disdain US calls to allow the yuan to appreciate.

Presumably both the Chinese and the Americans know that the yuan needs to be floated rather than just increased, if China is not to import inflation from the old-world nations as they seek to dissolve their budget deficits in the least painful way.

The worst case, of course, as it was with Australia in the days of the "managed float", comes when imported inflation adds to domestic inflation. Assuming, as we must, that monetary economics 101 has penetrated the power centres in Beijing, the prospect of China catching the Australian disease is enough to make an old communist writhe uncomfortably in his bed at 3am.

Nowadays, of course, Australia has an independent central bank with a mandate to keep "underlying" consumer inflation in the range of 2 to 3 per cent while paying some attention to asset inflation (we are recently told) as well as the state of the economy. Then there is the Reserve Bank Act, which says that the duty of the Reserve Bank board, "within the limits of its powers" (nice caveat that), is to ensure that the monetary and banking policy of the bank is "directed to the greatest advantage of the people of Australia and that the powers of the bank under this Act are exercised in such a manner as, in the opinion of the Reserve Bank board, will best contribute to: (a) the stability of the currency of Australia; (b) the maintenance of full employment in Australia; and (c) the economic prosperity and welfare of the people of Australia".

All this is literally impossible, of course, but don't tell the Treasurer as he might open some rather unpleasant cans if he becomes engaged in this debate. This will eventually occur, and no amount of revealing the man behind the mask on national television will prevent the resulting rethink.

Australia is poised with net advantage between the old world and the new world.

Industrial production has been falling and business confidence is about neutral - based on an average of those who are working flat out to service the new world and those who are struggling in competition with the new world.

Overall, employment growth has been strong, yet hours worked are still low and there are many people not counted in official figures who would like to work if they could.

Goods and services inflation is rising too fast for comfort and the latest unofficial statistics, when annualised, look rather alarming.

House prices are rising quickly, and not just in the mining states. The latest reading says house prices nationally rose 1.4 per cent in February and are up by 3.1 per cent in just the past three months.

Within this concerning overall picture, prices in Melbourne are up by 5.4 per cent in the past three months, and in Sydney by 3.8 per cent.