Fortune to determine whether Stevens emerges as a hero

Last week's fall in retail turnover and dramatic slowdown in credit growth shows that monetary policy is working.

Despite alarmingly high inflation relative to the "target range", there is now a fair chance inflation will return to the target range of 2 to 3 per cent by 2010.

By then of course, the Government's Emissions Trading Scheme (ETS) may be in place, but probably with a very low carbon price and petrol prices quarantined so that consumers will feel little obvious extra pain.

With a bit more luck, with continuation of the latest trend, oil prices will be lower, there will be relief at the bowsers - and for battlers forced by lousy public transport to drive their cars to work. The job losses now building will nip in the bud any general tendency for excessive wage hikes.

And Stevens' joy will be complete if the credit crunch retreats rather than worsens and pressure on loan margins (above cash rates set by the Reserve) eases.

If all these happy things occur, before long the Reserve will be able to cut rates, relieving pressure on households. They'll look like heroes, or at least fail to look like idiots.

If things go badly, of course, the idiot possibility will re-emerge. There are two ways in which the idiot scenario might come to pass.

The first is that the price of oil rises again to new records, the credit crunch gets worse, business and household confidence sags further, consumers stay shell-shocked in their homes, and businesses lay off many workers, compounding householders' woes.

Even in Australia, house prices are now said to be declining, and the fear-mongers are suggesting far bigger falls are in prospect.

In this "worst case" any rate cut will be seen as too little, too late, compounding the current perception (at least in the popular press) that "The Enforcer" has played too hard with his famed "independence".

Or, second, if the global scenario is more positive, the resource boom roars on, Australian consumers perk up quickly and begin to spend their tax cuts while demanding higher wages which add to inflation, putting 2-3 per cent by 2010 out of reach.

The sad fact is that the future is ever clouded and unsure.