Aussie economy powers on

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.

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.