November 7, 2007
It is as expected. The Reserve Bank of Australia increased the cash rate by 25 basis points to 6.75 per cent. It's tone is hawkish:
Inflation in Australia has increased. Underlying inflation was 0.9 per cent in the September quarter and close to 3 per cent over the past year...The world economy is still expected to grow at an above-average pace, however, led by strong growth in China and other parts of Asia. High global commodity prices remain an important source of stimulus to Australian spending and activity.In Australia, the tightening in credit conditions resulting from the global turmoil has been less pronounced than elsewhere. Wholesale funding costs have risen a little compared with official rates, and some borrowers have experienced an increase in interest costs as a result, but the flow of credit to sound borrowers does not appear to have been impaired.
So much for those who argued that an increase was not needed because of a recession in the US, due to a fallout in the subprime mortgage market. If that does not mean big political pain for the Howard government, then it places them on the political back foot.
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Gary,
we can now expect Peter Costello to come out and perform his job: explain that everything is going very well (economy booming) and 'that's because of us'. And, if everything is not going well---referring to the interest rate increase--then 'it's not our fault'.
It will be like watching a pantomine.