We have a long way to go, ie commodities prices are coming down after all the hedge funds stopped speculating and that means the RBA's growth and terms of trade forecasts are wrong, so by default inflation will be lower.
Back in March i remember thinking to myself that the rate rise was a mistake especially when the banks were increasing rates independantly of official cash rate increases. now it has come home to roost and they are back tracking, the commoditis boom is over, ie there will still be underlying demand but the price increases will be much lower if any of the next few yrs.
but cutting rates to 6% we are still 400bpts above the US and 150bpts above Euro Zone. our rates will move down much more, probably low 5% i recon by the time all this is over, but i think our markets have already factors these issues in, its just the RBA that used historical info to make its rate decisions and in 10 ys or 20 yrs Govenor Stevens will go down in history and helping to casue a recession here in Australia during a reources boom, in truth, the only reason we are doing worse off than the Europeans or Americans is because of the commodity exports.
as the ecomony slows more just watch all the economists come out and bag him for raising rates earlier in the year and then cut by such a big amount. the markets dont like it because its hard for them to get an idea of what the likely moves of the RBA will be in the future, if they didnt see this coming what does the RBA know that the rest of the markets doesnt?
this is not going to give the markets confidence, its gona make it think there is something very serious happening.
