The Reserve Bank board will consider interest rates two weeks from tomorrow with Treasury Secretary Ken Henry in attendance. But in a reversal of the usual procedure Dr Henry will nether discuss the decision with his Treasurer nor seek the Mr Swan's view as to how he should vote.
Wayne Swan will watch helpless as the Bank reacts to consumer price figures out Wednesday week about which he will be uncommonly uninformed. Normally Treasury staff are locked up with the figures until their release at 11.30 am in order to give Wayne Swan an instant briefing, making him seem about the best-informed person in the land. Not this time. And the figures will matter...
The Reserve Bank this month placed Australia on notice that if the so-called underlying measure of inflation is once again above 3 per cent on it will consider pushing up rates on August 3. The Bank's target is for a rate between 2 and 3 per cent on average over the cycle. It's been above 3 per cent for three years now and the Bank's getting toey.
The Bank board would push up rates without compunction if it thought it was needed and thought the economy could stand it. It put that beyond doubt in the last election when it pushed them up during the caretaker period days before the vote rendering the Prime Minister's promises about rates meaningless.
A hike in the cash rate from 4.5 to 4.75 per cent Tuesday fortnight would add a further $48 to the monthly cost of servicing a $300,000 mortgage and $64 to the cost of repaying a $400,000 mortgage within weeks of the vote, lending apparent weight to Tony Abbott's complaints about mortgage rates and prices.
From Tuesday the newly independent departments of Treasury and Finance will be available to the opposition as well as the government to cost promises, but the deal isn't as good as it seems. Every request for a costing has to go through the Prime Minister. Tony Abbott might attempt to get around this by submitting his requests late. It's what Kevin Rudd did last time.
Published in today's SMH and Age
How it will work:
ABS embargo rules
Charter of Budget Honesty
Charter of Budget Honesty: Pre election Provisions
2010 Costing of Election Commitments Guidelines
Election costings website
. Lock August 3 in your diary, it's the most likely date for a pre-election hike
. Why Swan told all, again, just two months after the Budget
. Henry sidelined?