Seriously, can anyone now doubt that the Reserve Bank will lift its official cash interest rate from 0.1 per cent at its meeting on May 3, and take it straight to 0.5 per cent?
The idea that RBA governor Philip Lowe could see headline inflation for the year to March go above 4 per cent - maybe significantly above 4 per cent, and running close to 6 per cent in the six months to March on an annualised basis – and say not only that 0.1 per cent was still appropriate, but that he’d then ‘get back to us’ a full month later, in June, is utterly, utterly ludicrous.
It is only slightly less ludicrous to suggest that raising the rate only to 0.25 per cent would any longer be credible or indeed have any point.
The time for doing that was at the February meeting, straight after the December quarter inflation numbers.
The March quarter numbers will be published by the ABS in two weeks on the 27th.
Inflation in the US has now hit 8.5 per cent, the highest it’s been since the early 1980s.
The Fed has its next meeting immediately after the RBA’s May meeting – although, that’s purely coincidental.
The Fed will raise its rate by 0.5 per cent.
Absent of course some global – mega – disaster; and the same applies, legitimately, to the RBA.
The Fed is way, way behind the curve.
It should have started raising rates a full year ago when US inflation went past 5 per cent.
Instead it dismissed the inflation as ‘transitory’, saying it would be back down to 2 per cent by the end of 2021.
That sort of miss makes Anthony Albanese’s look almost like just a rounding error.
Our RBA is nowhere near as far behind.
Inflation only hit 3.5 per cent in the December quarter.
The higher 3.8 per cent figure for the June year was distorted by what happened in the lockdown and GDP plunge in 2020.
But NZ shows how quickly you can get behind.
NZ’s Reserve Bank delivered a ‘double’ 0.5 per cent rate hike Wednesday.
And that followed three 0.25 per cent hikes at all three of its previous policy meetings; and because NZ (sensibly) never went all the way down to zero (0.1 per cent), stopping at 0.25 per cent, its cash rate is now 1.5 per cent.
Now I’m certainly not suggesting that’s where our RBA should be, or should quickly head to – like with three 0.5 per cent hikes; whack, whack, whack.
Inflation in NZ in the December year hit 5.9 per cent, ours as noted was 3.5 per cent.
But the message out of NZ was how quickly it accelerated.
Inflation there started 2021 at just 1.5 per cent; it then leapt to 3.3 per cent, 4.9 per cent and then the 5.9 per cent.
The core factors driving the accelerating inflation – albeit at different degrees of intensity – in the US, NZ and Australia (and everywhere else) are essentially the same: supply chain disruption, rising energy and other commodity prices before Ukraine, accelerating or sustaining after, and labour shortages.
Thursday’s jobs and jobless numbers will provide critical information.
If the jobless rate drops below 4 per cent, it will be good news for all workers – promising not only jobs but rising, perhaps even sharply rising, wages – and good news for Scott Morrison and Josh Frydenberg.
But obviously bad news for Anthony Albanese: just when he’s presumably learned the 4.0 per cent by heart, he’ll have to ‘unlearn’ it and learn a new number.
And with the 0.1 per cent to also change in a couple of weeks.
And then yet another jobless number just two days from the election. Can he possibly cope?
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