Business running an inflation marathon 2:57pm 9.04.08

Inflation will remain above three percent until 2010, predicts economic analyst BIS Shrapnel. As the Reserve Bank attempts to steady the cash rate, BIS believes low rates will be a memory for the next decade.

“Aided by the worldwide credit squeeze, the RBA has been steadily tightening the noose on consumers in order to make room for an investment boom it can’t actually influence,” said BIS Shrapnel chief forecaster, Richard Robinson.
 
Robinson adds that the strength of employment and successive income tax cuts have undermined some of the Bank’s actions. “The RBA will be successful in reigning in the economy in the short-term,” he said. “The problem is that it will only be a temporary measure because, in the absence of a recession, we won’t see a blowout in the unemployment rate. Consequently, it won’t take long for labour markets to tighten up once again.”