inflation uncomfortably high cba

Mentions Centro Properties Group.
Should we read in between the lines????

Article from Faifax...

Commonwealth Bank of Australia chief executive Ralph Norris says there are clear signs that the Australian economy is slowing.

Mr Norris also said inflation could stay uncomfortably high unless there was a significant decrease in household spending this year.

Only time would tell what impact a slowing US economy would have on the rest of the world, particularly Asia, Mr Norris said.

"While the short-term outlook in Australia is more positive, there are clear signs of slowing activity in parts of the economy,'' he told a business lunch in Sydney. "Higher petrol prices, interest rate increases, are definitely weakening consumer confidence and spending.

"The credit crunch is also reducing business borrowing and will most probably mean a scaling back of capital spending plans over 2008.''

Mr Norris said the mining, construction and infrastructure sectors were still running strongly on record commodity prices and record government spending on capital works.

"The major problem for the Reserve Bank is that inflation outcomes could stay uncomfortably high unless there is a significant weakening in household spending throughout the balance of the year,'' Mr Norris said.

Mr Norris said credit growth was appearing to hold up well, although not at levels the bank had been accustomed to recently.

"Consumer arrears rates remain similar to that of a year ago, so we haven't seen any significant deterioration in consumer arrears and the servicing of debt.''

On the commercial side, Mr Norris said the bank wasn't seeing any systemic problems apart from a few one-off single-name exposures such as CENTRO PROPERTIES GROUP.

Mr Norris today declined to rule out the bank handing down more rate increases independent of the movements in the official cash rate by the Reserve Bank of Australia.

He told reporters that any decision by the Commonwealth Bank would depend on its average cost of funds.

"And at the moment we see the average cost increasing on a day-by-day basis, and that's why we've had to increase interest rates out of sequence with the official cash rate,'' Mr Norris said.

Mr Norris reiterated that he expected the global credit crunch to last for at least another 18 to 24 months.