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No need to kick the economy

GOVERNOR of the Reserve Bank Ian Macfarlane says: “It would be hard to make the case that we have already pushed up interest to a point where it is actually hurting.” No doubt he does not have a mortgage, or has ever had to meet a payroll.

Economists are jumping up and down because 75,500 new jobs were created in July instead of their predicted 16,000.

Closer analysis shows that the jobs are part-time, and largely relate to the Olympic Games and the extra hands needed to sort out the complexities of GST.

Many of those jobs are likely to be shed, unless we plan to hold another Olympics after Christmas. And it seems only five minutes since the experts were wailing about a building slump and tougher times to come.

However, when the RBA is driving monetary policy it cannot just concentrate on the rear view mirror. The Australian economy is about to be goosed by the fiscal stimulus of $5.5 billion worth of tax cuts. The $4.5 billion float of NRMA has given 1.6 million policyholders share allocations.

Although NRMA had a comparatively subdued debut, the “feel good” factor will help loosen consumer purse strings.

With 54 per cent of Australians now owning shares directly or indirectly, the stock market is increasingly regarded as a wealth creation engine.

Compulsory superannuation contributions will tip another $3 billion into the hands of fund managers this financial year, lifting the total to $35 billion.

Takeover activity is also playing its part. The bulk of the $3 billion worth of Rio Tinto cheques going out to North shareholders this month will find their way back into the markets.

Exports are growing at a 28 per cent annual clip, and much faster than that in WA. The net result of all this is an economy going into its 10th year of 4 per cent plus growth.

A tap on the interest rate brakes will help to keep the inflationary genie in the bottle. But there is no need to put the boot in.

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