Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Reserve Bank should sit tight on interest rates

By Henry Thornton - posted Tuesday, 6 July 2010


The conversion of Treasury's mad tax 'n' subsidy plan into a far more sensible profit-based tax has removed deep uncertainties that have put new mining projects on hold or given less priority. The mining boom can continue, after factoring in Chinese slowdown expected by mining strategists. But continued boom in the mining areas is already running up against shortages of skilled labour. Foreign workers, both temporary and immigrants, have provided a safety valve so far, but the debate over the rate at which Australia's population is to grow sounds a warning bell. Recent numbers of immigration have been at a rate at which Australia's population will grow too big and too quickly for comfort for many Australians.

Australia's signs of inflation include the fact that goods and services inflation has exceeded the general expectation and the forecasts of the RBA. This in turn is due to activity growing faster than predicted and the board has to decide whether or not the new deflationary forces are sufficient to offset inflation.

A month ago, we learned that in the 12 months to May, the TD Securities-Melbourne Institute Monthly Goods and Services Inflation measure rose by 3.7 per cent, the fastest pace since October 2008, smashing through the upper limit of the RBA's 2-3 per cent inflation target range.

Advertisement

The Fair Pay Commission has granted a catch-up wage increase compensating for two years CPI inflation. This has happened at a time when the rate of unemployment is close to what is regarded as full employment. The RBA will be worrying about all these indicators of inflation.

A cautious central bank will sit tight today. Further rate hikes will be needed, but now is a time for caution as the world faces the possibility of a double-dip recession, or worse.

  1. Pages:
  2. 1
  3. Page 2
  4. All

First published in The Australian on July 6, 2010.



Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Henry Thornton (1760-1815) was a banker, M.P., Philanthropist, and a leading figure in the influential group of Evangelicals that was known as the Clapham set. His column is provided by the writers at www.henrythornton.com.

Other articles by this Author

All articles by Henry Thornton

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Henry Thornton
Article Tools
Comment Comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy