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."

Sunday, July 10, 2011

Keep an eye on inflation expectations (chart)

The following chart is from the AFR's David Bassanese, who has punched out some good rates columns in recent times (Jessica Irvine is also worth a read in the SMH on Friday). Everybody should now know that the course of Aussie rates will (rightly or wrongly) be determined by the Q2 CPI numbers, with the recent data flows having granted us--rightly or wrongly--a stay of execution. There is a bit of disagreement over what core inflation numbers would prompt the RBA to move. One thing we do know is that the two extremes--a very low (eg, core of 0.5% or less) or a very high (0.9% or more) print--will have radically different consequences for the near-term welfare of Australians. A really low number means that we are a better-than-evens chance of seeing out the year with rates unchanged, which would make my mate Peter Switzer very pleased indeed. Happy days for indebted households, the housing market, and currency-sensitive sectors of the economy. A very high inflation result would mean that we are more likely than not to be hit with two hikes this year, which will suck the life out of all the aforementioned industries.