Emergency is over, but no rate rise for Christmas

Australia is of course a developed nation whose consumer spending should fall in relation to income, and hence we are on the wrong side of the imbalances divide. But with the amazingly rapid recovery of Chinese growth, the renewed resource boom will underpin Australian activity and provide time to adjust.

Higher taxes will include a resource rent tax and, one assumes, some sort of pollution tax, although the diabolical climate change problem is wreaking havoc on Australia's more conservative political party.

As argued powerfully by several participants at the recent Melbourne Institute-The Australian conference, a strategy is needed to ensure that we don't simply waste the renewed resource boom but use it to improve substantially national investment and productivity, boost savings (to help contain inflation and the current account deficit) and fund adjustment to a low-carbon future.

Easier said than done, comrades, but the sooner we can agree on a viable plan the better will be the outcome for our children and grandchildren.

There is a massive agenda ahead of the nation. Glenn Stevens' task is to make sure inflation remains under control whatever the global risks and uncertainties and the pain of domestic adjustment.

Ideally, interest rates would be nearer to neutral now, ready to be raised if inflation (defined broadly) shows signs of breaking out.

Today, I expect caution to prevail. Global uncertainties are greater than they were a month ago, asset inflation has taken a hit following a renewed debt scare and goods and services inflation here is no worse.

Besides, no one wants to wreck Christmas, and Stevens is no Grinch.