Mr CIOBO: I have a final question in terms of the effectiveness of monetary policy. This has been put to the committee by a number of commentators. If the source of inflation is predominantly coming from that 25 per cent of the economy experiencing a 15 or 16 per cent rate of growth—that is, the mining sector and associated industries—and 75 per cent of the Australian economy is growing at one per cent is monetary policy the best tool to curb inflation or are we better off looking at, for example, other alternatives like quantitative easing [sic??] or perhaps reductions in government expenditure?
Mr Stevens: Quantitative easing is an easing of policy [CJ: Oops!], but I would expect that to increase inflation [CJ: Double smack-down!] If we look at the 100,000 prices that are in the CPI, aggregated into 100-odd expenditure classes, it is not actually mining that is pushing up most of those things directly. Prices of goods in the latest quarter rose surprisingly strongly, we thought, given the reports we had had about discounting. There may be a seasonality issue in the data there. Utilities prices are rising strongly. I think that is testimony to not enough investment in the network capacity and so on over a very long period of time. That is a supply side constraint that has to be addressed with higher revenues for the producers, so the administered prices are rising.
So I do not actually accept that all the inflation is in fact coming just out of mining. It is true that a lot of the growth and output comes from mining and all the parts of the economy that feed into it; it is not just mining itself. But what I think we do have, on our best estimates of abstracting from special factors and so on, is a bit more broad base rise in prices. At least, it stopped falling and it looks as if it may be just starting to edge higher. I do not think that per se is directly just the mining stuff. Were it not for the high exchange rate, I think we would have more of this. Phil, do you want to add to that?
