The Reserve needs to give much thought to this matter.
A third possible reason for caution in hiking rates is fear that the economy is already slowing. Pollster Gary Morgan, whose consumer confidence measure dropped substantially in January, is in this camp.
One must recognise that all official statistics yet released - including December quarter inflation - provide rear-mirror views. That said, growth of retail sales, jobs, credit and all other relevant statistics from the economy in late 2007 show an economy growing unsustainably fast.
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Even house prices are rising again, in some cities (including Melbourne) at scary rates. To be sure, there has been a lot of equity price deflation, as part of the global financial crisis, but not so far at least to be of sufficient concern to override all the other measures of economic strength.
First published in The Australian on February 5, 2008 and on Henry Thornton’s blog.
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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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