Rates must go up and they will.
In his important speech on Tuesday -- it's important to understand, before he had any knowledge of yesterday's inflation figures -- Stevens argued that softening was achieving the necessary 'making way' in the non-resources economy for the resources boom.
But the clear inflation pressure means he can't assume that will continue. China is pouring a tsunami of money into Australia. We could all too easily see inflation kicking up above 1 per cent a quarter as it did in 2008.
A Tsunami? Australia's GDP is around $1 200 000 000 000 or $1.2T
Australia's exports to China was $58B last year
Australia's imports from China was $39B last year
A nett gain of $19B on trade.
China's foreign investment in Australia was $16.3B last year.
FIRB Annual Report 2009/10 (p33)
Approved investment from the US fell by 1 per cent from $39.6 billion in 2008-09 to$39.1 billion in 2009-10. Proposed investment was primarily in the mineral explorationand development sector, accounting for 64 per cent of total US investment. The US wasalso the leading nationality for foreign investment in the services sector, accounting for48 per cent of investment in that sector.The UK was Australia’s second largest investor in 2009-10 with $28.6 billion.Investment in the mineral exploration and development sector accounted for$22.2 billion, representing 77 per cent of total UK investment in Australia.China was the third largest investor in 2009-10 with total proposed investment of$16.3 billion. The majority of this proposed investment was in the mineral explorationand development sector, accounting for $12.2 billion and representing 75 per cent ofthat country’s proposed investment.