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."

Friday, July 29, 2011

Aussie inflation is being partly driven by global inflation (charts)

Wow, this is the best piece on Aussie inflation that I have seen in a while. It is from Ricardian Ambivalence. If you read one thing on Aussie CPI, read his analysis (and this guy is one of my favourite economists, who normally has something new and informative to say). In short: as I have argued for some time now, we seem to be importing inflation from our trading partners, and Aussie inflation correlations with global inflation are rising and currently sitting at exceedingly high levels, as the first chart below shows (circa 80%). This is bad news, since the imported inflation is only compounding the domestic price pressures. What is seriously scary is this: we have got these outcomes with huge currency appreciation and seemingly weak growth. If there is another financial markets crisis, the Aussie currency could correct sharply, exacerbating the imported price pressures. Check out Ricardian Ambivalence's charts and try and his read his note: