Jul 012008

I spotted this in the Oz today, just before beetling off to the grindstone.

When trawling through the RBA site for the latest media release, following today’s board meeting, I remembered the article and thought to look at the raw data. Numbers alone don’t tell any story, so I graphed a few.

SShot_ 2008-07-01 19.25003 SShot_ 2008-07-01 19.25004

There’s plenty of doom and gloom around the finance game at the moment, but all things considered, while the waters might be a little slack, for those still in the swim there is still business to be had. The graphs above don’t display anything like the dread and disaster painted by the media, but they do display the combined cost of living / fuel price / interest rates increases over the past twelve months. I don’t believe that interest rates alone have slowed the economy. If that were the case, given the inflationary imposts levels still apparent, the RBA wouldn’t have hesitated to raise rates again today. The fact that the board held off, despite expressed concerns about the current state of the economy overall, speaks to me of a genuine anxiety over the early flush of rises in January & March which many economists said might have been over-stated. The freight-train of oil pricing doesn’t look like slowing any time soon, and it’s feeding the CPI rises. The resources boom is rapidly creating a two state economy. One which is fuelling inflation through profligate spending power; the other retreating in the face of unmatchable costs and diminishing purchasing power.

The RBA board is now faced with an unpalatable decision. Accept a higher than currently accepted underlying inflationary level in the Australian economy and hold off on any further exercising of monetary policy or; go for another rate rise in August and hope like hell that one half of the economy can mask the stench of the other falling stagnant. Rock and hard place? You betcha.

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