Friday, 19 February 2010

The best reason for an early double dissolution

 The Reserve Bank Governor Glenn Stevens gave the best reason for federal Labor to go to the polls as quickly as possible when he warned this morning that further adjustments to monetary policy would be needed to ensure inflation remained consistent with the RBA’s 2 to 3 per cent target band. Giving evidence to the House of Representatives Standing Committee on Economics this morning the Governor said: “If economic conditions evolve roughly as we expect, further adjustments to monetary policy will probably be needed over time to ensure that inflation remains consistent with the target over the medium term. This is a normal experience in an economic expansion: as economic activity normalises interest rates do the same.”
What the Reserve Bank thinks of as normal rates are rates up to one percent higher than now. An increase anywhere near that size before polling day would have many voters under considerable financial pressure.
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