NEWSFLASH! In September I will join The Conversation as its Business and Economy Editor. I have been honoured to work at The Age for the past ten years, originally alongside the legendry Tim Colebatch, and for the past four years as economics editor in my own right.

At The Conversation, my job will be to make the best thinking from Australia's 40 univerisites accessible to the widest possible audience. That means you. From the new year I will also write a weekly column.

On this site are most of the important things I have written for Fairfax and the ABC over the past few decades. I recommend the Search function. The site is a record for you, as well as me.

I'll continue to post great things from The Conversation and other places here, and also on Twitter and Facebook. Enjoy.

Sunday, August 17, 2008

Reserve Bank trivia

Why do its forecasts always have the inflation rate returning to its target band?

Coalition politicians at this week's economics committee hearing felt a little pained that RBA had been forecasting inflation within the target band in the lead up to the election (essentially assuring everyone things were fine) and is now saying that that was the very time inflation was taking off.

Here's the revealing answer, from the Bank's Deputy Governor Ric Battellino, at Thursday's hearing:

"Our forecasts - we always have inflation coming back to the band, because by definition it has to.

I mean if you're not forecasting that it's back in the band you are saying by definition we've got the wrong monetary policy.

So you'll see that our forecast and every central bank's forecast for inflation around the world is basically at the end of the forecast period inflation is back in the band. That has to happen."

That's why.