“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 per
cent, compared with the market economists’ forecast range of 0.7 to 1 per cent
(the median forecast was 0.8 per cent). The annual rate was 2.5 per cent,
compared with the market’s median forecast of 2.7 per
cent.

“However, on closer inspection, the
news on inflation was not quite as good as it
looked.”

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!

Read the full article here.