This is a sample of The Echidna newsletter sent out each weekday morning. To sign up for FREE, go to theechidna.com.au
The Reserve Bank of Australia is in a pickle as it wonders how high it should keep pushing interest rates. At its board meeting today, the dilemma is: how bad do they think inflation is going to get?
In May, the RBA's governor, Philip Lowe, said he expected price rises to peak at around 6 per cent at the end of the year.
But only a month later, two weeks ago, there was a new peak. He revised it upwards to 7 per cent. Where, we wonder, will the next peak be?
The truth is that nobody knows - and, by the way, beware people who pretend they do. If economic pundits had such clairvoyance, they would be keeping quiet about it on a sun-lounger in the Bahamas.
We are in one of those rare and unpredictable turns of the economy. Inflation is back and nobody - nobody - knows quite when or if we can get back to the stable world where it was presumed dead.
So interest rates will rise. A common view among reputable economists is that the borrowing rate for mortgages could reach around 5.5 per cent (which to those of a certain age is a mere pin-prick compared with the hit to our finances three decades ago - the Baby Boomers had it tougher!)
The brutal truth is that the point of raising interest rates is to slow down the economy - in other words, to cramp our spending by raising unemployment and slowing wage growth.
Pain for gain, is the theory.
But we are still nowhere near the grimness of "stagflation", that dreadful combination of high unemployment and swiftly rising prices. Who remembers the word now? May it remain forgotten.
To those of us who do remember, the borrowing rate peaked at 17 per cent in June 1989 and stayed there for nearly a year.
The treasurer of the time, Paul Keating, said: "This is a recession that Australia had to have".
The difficulty is that once people expect rising prices, they try to compensate with rising wages - and a spiral sets in.
And workers do expect pay to keep pace with prices. After all, the Prime Minister told them so. Only in February, the headline on Mr Albanese's blog was: "Australians Deserve a Real Pay Rise".
Those words may come back to haunt him when and if he calls for pay restraint.
Where, by the way, is he? Well, Ukraine most recently, after Japan, Indonesia, the United Arab Emirates, Spain and France.
It's not a Hawaii moment. Not yet. But post-election honeymoons can be quite short.
HAVE YOUR SAY: Do you think the PM was wise to signal that real wages should rise? And did the Boomers have it hardest? One further thought: does anybody really know the difference between Boomers, Gen Y, Gen Z, Millennials? Just journalese, isn't it? Email us: echidna@theechidna.com.au/
SHARE THE LOVE: If you enjoy The Echidna, forward it to a friend so they can sign up, too.
IN CASE YOU MISSED IT:
- The Reserve Bank of Australia will decide on how much to raise interest rates. A widespread view among economists was that it would raise the cash rate (which banks and other lenders use to set their own rates) to 1.35 per cent - with another rise in August.
- Regional and rural newspapers will be handed a financial lifeline amid the surging print costs which have threatened the industry's viability. The government will begin consultation on $15 million in grants.
THEY SAID IT: "It's embarrassing. He doesn't need to do all this."
That was John McEnroe on Nick Kyrgios after the gifted-but-angry Australian had committed yet another mega-tantrum.
John, you may remember, was once known as "Super Brat" and "the angriest man in tennis".
His catalogue of bad behaviour was once legendary, abusing pretty well everyone from a photographer at the French Open, to a spectator at Wimbledon, to an umpire (the "pits of the world"), to Czech opponent Tomas Smid (a "communist bastard").
His catch-phrase, repeated by a million kids, was "You cannot be serious," shouted at umpires who had the audacity to rule against him.
But now Super Brat has calmed down. St John would be putting it too strongly but he has grown up. He is likable, even.
If he can mature, so can the current Super Brat. Can't he?
YOU SAID IT: "The current overseas trips the PM is taking are necessary considering the issues we are facing." - Rosemary.
"It is important that relationships with overseas governments be reset, and initial face-to-face discussions are an important part of that process." - Ross.
Mike also thinks Mr Albanese's foreign travels are justified, "trying to right the wrongs and failures of the previous government".
But he adds: "I believe it would be an opportune time now to return home and engage with the spiralling problems that are occurring on home soil".
Darrell is sceptical: "Nahhh. It's pretty stock standard for our politicians to galivant around the planet distributing our hard earned money like confetti at a wedding and cry poor if any of our own citizens ask for a helping hand."
Penny complimented our regular Echidna John Hanscombe: "Thanks for your article on the recent US Supreme Court decisions. It's good to see thoughtful articles like this in a regional newspaper. Finally, newspapers have found their voice again."
I'll try to keep up the good work.