It will come as no surprise to anyone that the RBA lifted its cash rate to 6.75%. Glen Stevens statement was relatively hawkish, noting that underlying inflation would likely leave the target band and stating the growth would need to moderate before inflationary pressures would ease.
The RBA left rates unchanged at 6.5%. Although economic growth and inflation have been stronger than expected in Australia, global uncertainty would have prevented another increase.
The question now is, will the RBA lift rates again this year? Ultimately, this will depend the degree of uncertainty surrounding global markets, and the strength of house prices over the next few months.
Does anyone that knows anything about Australia have any opinions on this, and general Australian monetary policy?
At least one Australian and one New Zealand commentator feel that the RBNZ is too focused on inflation. They use the example of the RBA, which seems to be controlling inflation without trying to strangle the life out of the economy.
Do people agree with this? Is our Reserve Bank an inflation zealot? Or does our Reserve Bank have a better idea of the long-term costs of inflation, and as a result, is more interested in stamping it out?
I’m not even sure that the situations are comparable, Australia’s growth rates and productivity rates have far outstripped ours, giving their Reserve Bank more leeway to control inflation. After all March non-tradable CPI inflation was only 3.5%pa in Australia, compared to 4.0%pa in New Zealand, indicating a significant difference in domestic price pressure.