I have lost confidence in the Reserve Bank's economic assessments and the arguments in favour of further interest rates hike soon after the budget regardless of its content.
They have missed the picture. The causes of inflationary pressures from external factors in the Middle East and natural disasters are beyond the control of domestic fiscal measures. Increase in interest rates are not only ineffective tool to resolve the problem, it will dampen some domestic sectors and widen the gap of the twin speed economy.
Don't they listen to the small businesses especially the retailers' groan. Consumers have been tightening their belts for a while now. The stimulus package has been mostly expended and some saved up for rainy days.
It is quite worrisome our bureaucrats make policies based on weak assumptions. Unless there are experts with political clout who are able to talk some sense to the government and the central bank, the future looks bleak.
Brace ourselves for greater hardships from higher mortgage repayments and cost of living. It's going to be a triple whammy for majority of the Australian working class.
QUOTE :
Yesterday the bank said unless it acted swiftly, inflation would climb to the top of its target band and sail beyond it.
It has held its cash rate steady at 4.75 per cent since November. An increase of 0.25 percentage points would push the variable mortgage rates charged by Westpac, the Commonwealth and ANZ banks above 8 per cent. It would add about $50 to the monthly cost of servicing a $300,000 loan.Read more: http://www.smh.com.au/business/nothing-swan-can-do-to-stop-rate-rises-20110506-1echp.html#ixzz1LeS1dgsZ
