Canberra cartwheels on CPI

From rate rise to rate cut, what a difference a week and the release of the consumer price index (CPI) makes! The December CPI indicates that the build up of inflationary pressures seem to have eased, leading to the probability that the Reserve Bank will be more inclined to leave official interest rates static at their February meeting.

Just as bananas had been blamed for the increase in inflation in mid 2006 they are now being credited with assisting in easing inflationary pressures, does this mean we will see Cafes across Australia reduce or abolish their banana surcharge on smoothies? Aiding bananas in their fight against inflation were fuel costs, medicine prices and other members of the fruit family.

With underlying inflation below the Reserve Bank's target band of 2 - 3 per cent and registering its smallest increase in 3 years over the last quarter of 2006, talk has now turned from rate rises to rate cuts. This will be music to the ears of New South Wales premier Morris Iemma who is facing a 2007 election and needing the economic equivalent of jumper leads to help kick start the NSW economy. Perhaps investor and business confidence will return to NSW now an increase in rates is seen as unlikely in coming months.

Taxpayers may be a little disappointed though with the need to ensure inflation pressures are minimised giving Costello an easy way out of delivering further tax cuts and or tax reform in the May budget - a move that will be supported by Acting Treasurer and Finance Minister Nick Minchin, who warned that the government will continue to ensure budget policy contributes to keeping inflation low.

That is all well and good but 2007 is an election year and nobody elected their co-worker to the social club committee for advocating dry biscuits over Tim Tams for the monthly morning tea!!