INFLATION STAYS IN YOUR SWEET SPOT

Feel free to start a queue: all those demanding higher inflation – yet higher gas, power and petrol prices and increased charges for most things in your life – so that the Reserve Bank can start pushing up interest rates and increasing your monthly home loan repayments.

And further, not exactly incidentally, if you did manage to win a pay rise that was more or less in line with the higher inflation, those characters in Canberra – in an entirely bipartisan way – would be more than happy to take an even bigger slice of tax via insidious and devious bracket creep. Plus of course, GST.

Although the more likely outcome than wage increases all around would be that some of you at least would lose your jobs. That really would be the whole enchilada: higher prices, higher loan repayments and lower, as in all the way to zero, income. At least, they’d be ‘saving’ on tax.

The latest inflation numbers came in on the ‘low’ side. I say in response, somewhere between how come we keep getting so lucky, when we sure as hell don’t deserve it, and whoopee or triple whoopee.

The actual annual (or annualised) inflation number was somewhere between 1.5 and 2 per cent, depending on your choice of measures from the ‘menu’ of available calculations.

Now, that was below or maybe just below the RBA’s target range of 2-3 per cent. I personally wouldn’t have been at all fussed if it had come in even lower, at say around 1 per cent.

That’s, importantly, in the context of the broader economy we have.

It is also important enough to point out right upfront that one entirely artificial price-cut – the new taxpayer funded subsidy for child care – could be ‘blamed’ for all on its own delivering an overall inflation number below the RBA range. This is a price cut which is not going to be repeated in future inflation.

The other big point to make upfront, is that for so long as it stays below the 2 per cent bottom of the range, and looks like staying there, the RBA won’t be lifting its official rate. Again, I say, somewhere between whoopee and what exactly is the problem?

I say this because right now, if we could freeze the economy, all the major numbers add up to a pretty-tovery good mix.

They are:

• Low and even more importantly steadily low inflation overall (a mix of some things going up uncomfortably, other things steady or going down (apart from childcare).

• Lots of jobs still being created. Again, importantly, for both men and women and with more of them full rather than part time. The statistical jobless rate is right down to 5 per cent.

• Wages that are creeping up; but in not rising at a faster pace are saving you from Canberra stealing an everbigger chunk of your income.

Further, very simply, I emphatically endorse the trade-off of jobs for those with low or zero incomes against higher wage increases for those already in work. What’s also not well understood is that it is a trade-off which also works for those with jobs.

It makes it easier for people to switch jobs and by switching jobs, by upgrading, actually get a valid paid-for pay rise not just an automatic one.

This relatively static pay combination with lots of jobs creation is also exactly the sort of mix we need in the new 21st century world of digital disruption and massive, unrelenting, almost 24/7 structural change. Unfortunately, all that is or

was the ‘good news’. The bad news is that it is a picture of a moment in time; it is unlikely to last.

A whole range of local and global factors are coming and will keep coming at us.

These range from the dynamics of the US and China economies – the two, which are not only the most important in the world but especially and uniquely for us.

This is, crudely, China buying our iron ore and coal, our tourism and our property; the US deciding what interest rates they and the rest of us pay, along with what happens to our superannuation via Wall St.

We really do not need to add further gratuitous change – and ratcheted up uncertainty – to the plenty that we are going to get whether we like it or not.

I do not want to rush to a world in which the RBA has to raise interest rates – or, indeed, have to consider cutting them. The minute it pulls ‘that lever’ for the first time, we will be into new and greater instabilities.

So be grateful, very grateful for yesterday’s numbers in the broad.

Also be glad that some things weren’t rising in price at the sort of pace we’ve seen some – too many – things go up, often entirely, if selfinflicted, unnecessarily.

Did anyone mention electricity and gas?