No Cup Day cut? Blame Julia
by Peter Switzer
Wall Street had another bad day at the office but the local focus should be on those inflation numbers that could rob us of an interest rate cut on Cup Day. If that happens, there’s only one thing to blame — the carbon tax — and if you want to bag someone, I reckon you have to go straight to the top — the Prime Minister, Julia Gillard.
Please don’t call me sexist, a chauvinist or a misogynist — just call me an economist or economics commentator who both praised and criticised Bob Hawke, Paul Keating and John Howard when they got it right and when they got it wrong.
When Julia first encountered tough guy Tony Abbott as the new Opposition leader, she actually said in Parliament: “Bring it on! Bring it on!”
Now I don’t want to get personal. I want my assessments to be public and so let’s tell it as it is — the inflation number of 1.4 per cent for the September quarter was mainly driven by electricity prices and most of that was carbon tax related. Don’t worry about the spin about power companies over-spending. They have been doing that for at least five years and the PM should have known that.
The carbon tax, as I have always argued, was an untimely, unnecessary imposition on consumers and business. The tax was proposed without compensation and when it was clear that we would not like it, thanks to a bleating Tony Abbott, along came the compensation for purely voting purposes.
If we waited for the rest of the world to do what we are doing, I wouldn’t have a complaint, but this carbon cost increase reduces our competitiveness when the high dollar has already made life hard for our exporters.
The PM broke her promise on carbon to appease the Greens and it has also helped build up our budget deficit. Wayne Swan now is telling us that his race to create a surplus will help bring down interest rates, but that means his deficit creation is to blame for the higher interest rates we have endured in recent years!
Rate cut ahead?
The pressure is now on the Reserve Bank Governor to cut rates on Cup Day, and he should, but I can understand why he would be a bit toey about another cut with the underlying inflation rate at 2.5 per cent.
The headline rate is only two per cent despite a 1.4 per cent rise in September, and without this carbon tax caused jump in inflation, we could have seen a few more rate cuts. Now, I am not so sure.
Fortunately, some conservative economists, such as the CBA’s Michael Blythe, still think a Cup Day cut is coming and I hope he’s right, but if we don’t get one, there’s only one person to blame and it’s not Glenn Stevens and not a man!
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Published on: Thursday, October 25, 2012
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