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Aussie economy powers on

By Henry Thornton - posted Tuesday, 4 July 2006


Henry has no doubt that Ian Macfarlane will be seeking to hold off a further rate rise until his loyal deputy gets the nod as his successor. Post such a decision there would be a more or less immediate rate hike, with a second one to come once Stevens was firmly in the driver's seat.

Henry will get no thanks for saying so, but Stevens is far more of a traditional central banker than Ian Macfarlane, or Ken Henry for that matter.

Should Ken Henry get the job, a second rate hike would be far less likely. But a steady rise of domestic inflationary pressure would be correspondingly more likely. Eventually, of course, the pressures to hike rates would overwhelm Dr Henry's natural soft-hearted instincts, since as Reserve Bank governor he would not wish to be remembered as the man who gave away Australia's low-inflation reputation.

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The Treasurer's judgment about the RBA governor is likely to depend on whether, or indeed when, he hopes to contest an election as prime minister.

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First published in The Australian and on Hnery Thornton's website on July 4, 2006



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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.

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