Friday, March 14, 2008

A rate rise in May "is about as likely as a Bulldogs premiership"

Tim Colebatch in this morning's Age:

"IT COULD be the last bit of economic good news for a while, but it was nice. Australia's unemployment rate has shrunk to less than 4% — 3.97%, to be precise — for the first time since the Long Boom ended, back in 1974.

But that was in February, which may have been the last month of this long summer for Australia's economic welfare — 16½ years of growth, which has seen 3 million people gain jobs, our output per head expand by 50%, and living standards swell from top to bottom.

Now it is March, and what happens next is another matter. The Reserve Bank is worried about inflation. OK, let's be blunt: inflation is yesterday's problem.

There will be inflation tomorrow, but it will not be the problem we, or even the Reserve, will be worrying about.

Analysts greeted yesterday's good news on jobs with the usual knee-jerk reaction: this shows the economy is strong, so it raises the risk of an interest rate rise in May.

No, it won't. An interest rate rise in May is about as likely as a Bulldogs premiership."