No rate rise

 I was not surprised there was no rate rise. Inflation is not on the rise and we do not even know if the last quarter CPI was an outlier or not.

As the retail figures are showing the economy is slowing quite a lot. Unless you believe the economy must go into recession to get inflation down to proper levels talk of increasing rates is hairy chestness at its worst.

The budget is up next tuesday. As i have said previously the government is in a bind. The previous did not do any budget repair at all. To pursue this when the RBA is aggressively increasing interest rates is absurd. Modest improvements yes because anything else would bring on a recession.

Might I say it is hypocritical in the extreme for the Opposition to do this given they di not pursue budget repair at all. In examining fiscal policy you look at spending but also taxation. This is why the current government's fiscal policy is modestly restrictive. It could change at the margin next tuesday because of the tax cuts. This will only have a very modest effect on the economy perhaps allowing the economy to avoid a recession.

The government cannot aggressively pursue budget repair because of this  and because it is following monetary policy as the previous government did nothing about the ballooning budget deficits.

The times are tricky!