“Don’t underestimate inflation,” says
the AFR‘s Alan Mitchell. “Since [the RBA’s most recent evaluation], the
economic news – foreign and domestic – generally has been supportive of the
RBA’s optimistic take on the outlook for growth. However, inflation in the June
quarter was lower than anyone expected, and this has led to speculation the RBA
will now reduce its ‘tightening bias.’

The story of the June-quarter consumer price
index is interesting. The headline inflation rate was 0.6%, compared
with the market economists’ forecast range of 0.7-1% (the median
forecast was 0.8%). The annual rate was 2.5% compared with the market’s
median forecast of 2.7%. However, on closer inspection, the
news on inflation was not quite as good as it looked. In the meantime, economists expect
the RBA to watch the labour market like a hawk and keep its options
open.”

Regular readers may discern some
similarities with Henry’s latest economic review – “From hubris to nemesis.” It seems that great minds think alike! And cop the weekend AFR‘s
editorial: “Complacency the enemy of prosperity.” I reckon if Henry ran such a
close parallel line without attribution, the AFR would be on our hammer. Fair
go, men!

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