RBA to do the right thing by the government

Steady as they go. The June quarter producer price index figures out from the Australian Bureau of Statistics this morning suggest that the government will not have to worry about a rise in official interest rates disrupting its election campaign. The figures, while not a direct guide to what the official consumer price index to be released later in the week will show, were much lower than the dreaded economists had been predicting.

A poll by Reuters of market economists had predicted a rise for the quarter of 0.8% to give a gain on a year earlier of 1.5%. This morning’s figures came in at 0.3% and 1/0% respectively. There was certainly no sign there that inflation in Australia is about to escalate.

The Crikey Interest Rate Indicator continues to have the Reserve Bank leaving official rates unchanged as the most likely result of its August meeting.

I will be next PM: Abbott. It is a daring politician who defies the conventional campaign wisdom that appearing over-confident is a sure fire way to lose votes. Yet that is what Tony Abbott did consistently while campaigning in Western Australia. With no ifs, buts or maybes, he declared himself the winner as this ABC News report tells:

“‘Yes, I think that there will be a change of government and yes, I think that I will be the next prime minister of Australia,” he said.

Before the campaign began, Mr Abbott tried to deny leaked comments from a party room meeting that a ‘famous victory’ was in the Coalition’s grasp.

But today he was not mincing his words.

“I can sense there will be a change of government come August 21,” he said.

The Liberal Party campaign tacticians must be beside themselves with horror at the lack of discipline their man has shown.

Quote for the day. They are an amazing lot those American Republicans. Consider this recently delivered sage advice from Jon Kyl (Arizona), a senior Republican senator:

[Y]ou should never raise taxes in order to cut taxes. Surely Congress has the authority, and it would be right to — if we decide we want to cut taxes to spur the economy, not to have to raise taxes in order to offset those costs. You do need to offset the cost of increased spending, and that’s what Republicans object to. But you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans.

It is an attitude such as this that has caused the respected Financial Times of London columnist Martin Wolf to conclude at the weekend that:

This is extraordinarily dangerous. The danger does not arise from the fiscal deficits of today, but the attitudes to fiscal policy, over the long run, of one of the two main parties. Those radical conservatives (a small minority, I hope) who want to destroy the credit of the US federal government may succeed. If so, that would be the end of the US era of global dominance. The destruction of fiscal credibility could be the outcome of the policies of the party that considers itself the most patriotic.

In sum, a great deal of trouble lies ahead, for the US and the world.