The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Wednesday, October 19, 2011

Kudos to Fairfax's Peter Martin/Tim Colebatch on the CPI

Peter has a very good article in today's paper outlining the case for a one-off rate cut. This is exactly where my head was at if the RBA genuinely buys into the "changed" inflation outlook for the reasons previously explained: there is an argument for a minor technical adjustment back to a "neutral" cash rate from the current "mildly restrictive" stance. Nothing remotely like the 3.5% cash rate forecast by some. Peter touches on the very important employment data that I have reviewed below. I am not sure if he has actually seen the data, but it explains why the RBA is "especially sceptical" about the doves' story regarding Australia's uber-weak labour market. Kudos to Peter and Tim Colebatch, who evidently had the "inside" word on (1) the new CPI seasonal-adjustment impacts, and (2) the new CPI expenditure weights. My guess is that they were tipped off by a Treasury super keen to avoid a hike. Remember, now, that the RBA has said it explicitly considered hiking rates at its August meeting. They would have only had a couple of days to parse the CPI release, and, based on RBA staff commentary prior to the ABS revisions (but post the official Q2 release) about the "troubling" and "broad-based" inflation pressures (and the "0.1% pa" impact of the weighting changes), it is not obvious that they were completely on top of the CPI revisions. That's okay--we all make do with the information we are given by the ABS. Based on the Q1 and Q2 core results they had every reason to be freaking out.