Keeping money tight
By
Julia Newbould
Mon 18 Feb 2008
The Reserve Bank of Australia (RBA) earlier this month aired its concerns about inflation in Australia.
The Reserve Bank of Australia (RBA) earlier this month aired its concerns about inflation in Australia.
The RBA said inflation would remain uncomfortably high for some time and further monetary policy tightening was likely.
The central bank said in the short term it expected inflation to increase further given the strength of domestic demand and pressures on capacity.
It suggested the current level of interest rates was on "the restrictive side of neutral", thus foreshadowing further increases.
The cash rate is now 7 per cent. The RBA has lifted it three times since August last year - by 0.25 percentage points in August, 0.25 percentage points in November and 0.25 percentage points earlier this month. Lenders have been quick to follow with their own rate increases.
It is interesting the RBA continues to be so focused on inflation.
According to news commentary site Crikey, after surveying a cross section of the public, "[It is] nearly time to take the authority for running the country away from the Reserve Bank. They're a bunch of dills, obsessed with an unsustainable inflation rate, who can't see that the only people affected by interest rate rises are those who couldn't afford to buy a plasma TV anyway. One third are really suffering and the rest will spend what they like. Hands up those who'd rather have 4 per cent inflation and everyone with a job than 2-3 per cent and the joint stopped dead in its tracks."
For the planning community, a rise in interest rates is surely of less effect than the collapse of another financial services company or the economy being thrust into recession. The solution? Not sure, but more rate rises? Don't think so.
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