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Reserve should get on with making rates 'average'

By Henry Thornton - posted Tuesday, 6 April 2010


There has been a smaller, 2.5 per cent rise in Adelaide, but little movement in the capitals of the mining states, with prices in Brisbane up only 0.4 per cent and Perth down 0.2 per cent.

Clearly, forces other than the renewed mining boom are at play here, greatly complicating the Reserve Bank's complicated task.

When matters become too complicated, decision makers tend to grasp at the simplest credible decision rule. Goods and services inflation is up, house price inflation is up and we have interest rates below average.

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Another 25 basis point hike is therefore the likely outcome, perhaps even 50 basis points, if Glenn Stevens has received instructions to that effect from on high.

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First published in The Australian on April 6, 2010.



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About the Author

Henry Thornton (1760-1815) was a banker, M.P., Philanthropist, and a leading figure in the influential group of Evangelicals that was known as the Clapham set. His column is provided by the writers at www.henrythornton.com.

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