are you ready for the property crash, page-35

Should we let inflation be inflate?What will this do to the economies.How will it effect people living standard?

To me inflation is really a taxes on taxes, and if you get it let it out of control.Then the world will suffer in the long run.
The only people that benefit from higher inflation is the oil producer nations.(AND THESE COUNTRIES DONT VALUES LIVING).

So are we now ready to have an inflation measure between
4-5%,to accomodate higher cost of oils,etc.

So what will happen if it kept on spiralling upward.??

Alot of poor people will suffer,and society will not be a good place to live in.
There will be more crimes....








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Let inflation out of the comfort zone
By George Megalogenis April 26, 2008 03:07am
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THE Reserve Bank should tolerate inflation running above its 2-3 per cent comfort zone for the time being to support economic growth and jobs, according to former RBA governor Bernie Fraser.
He also said the Rudd Government would "probably get away" with the tax cuts due to pour into voters' pockets on July1 without damage to the economy because demand was slowing.

"We are very much back into the trade-off game and central bankers are going to have to start working hard again for their money," Mr Fraser said.

His warning was backed by respected economist and former Reserve Bank board member Bob Gregory, who said Australia risked a severe downturn if the 2-3 per cent inflation target were strictly adhered to when the China-led resources boom was forcing up food and fuel prices.

"We ought to be talking about how long it is acceptable to be outside the range when most of the inflation is imported," Professor Gregory said.

The two monetary policy heavyweights were responding to a call from former senior Reserve Bank officer Peter Jonson to suspend the 2-3 per cent inflation target to avoid a recession.

Mr Jonson, a former monetary policy hardman and editor of the Henry Thornton website, now believes that soaring international food and oil prices have changed the ground rules.

The comments, in a series of interviews with The Weekend Australian, confirm a debate is under way about whether monetary policy needs to be rethought to cope with the two-speed world economy in which the US and Europe face recession while China and India are feeding inflation.

Mr Fraser and Professor Gregory emphasised that inflation targeting remained the best approach for an independent Reserve Bank, and did not support a shift to another mechanism. But they believe there should be flexibility in how the regime is applied to ensure the Reserve Bank does not over-cook the response to inflation.

Interest rates have already been lifted to their highest level since 1996, yet there is no sign that inflation is under control. The latest consumer price index showed inflation at 4.2 per cent in the year to the March quarter, with prices jumping across the board.

Professor Gregory said the present climate was the most challenging since the world oil shock of the mid-1970s.

"I think in the current world, where Western Australia and Queensland are racing ahead because of the resources boom, and Victoria and NSW are not, the potential does exist for a lot of damage," he said.

"If you look at the RBA forecasts, and every sensible-person forecast, they say inflation is going to be outside the range for the next two to three years and, therefore, if you think the target is something you must be in, then you are better off widening it because the effect of moving back in would be too bad."

Mr Fraser said the days when China offered a virtuous circle of strong world growth with low inflation had passed.

"There hadn't really been a need for serious trade-offs between those objectives (of curbing inflation and promoting economic growth and jobs) over the past 10 or 12 years," Mr Fraser told The Weekend Australian.

"China had kept the world economy ticking over with all its commodity demands and it contributed to holding down prices by sending back all sorts of goods at what has until recently been at downward prices. It's certainly changing now as China is confronting inflation."