... & now for the bad news!
Yikes! Some of us are going to have to learn to love living on beans & toast, I think!
Inflation forecast bad news for rates
Economics correspondent
December 22, 2007/the AUSTRALIAN
INFLATION will rocket to 4 per cent by March, making further rate hikes a near certainty in the new year.
Internal forecasts obtained by The Weekend Australian reveal Treasury expects inflation to remain above 3 per cent - the top of the Reserve Bank of Australia's target band - throughout next year.
The alarming outlook suggests home buyers could face mortgage rates of close to 9 per cent early in the new year.
Interest rates have risen 11 times since 2001, lifting standard variable mortgage rates from 6.05 per cent to 8.55per cent in the last six years of the Howard government.
Former treasurer Peter Costello almost certainly knew during the election campaign that inflation was heading above 3 per cent, although he relied on year-average figures published by Treasury to assert that price rises would remain below the Reserve Bank's ceiling.
However,
Treasury has recalculated its internal forecasts since the November 24 election, using the latest official inflation figures for the September quarter and the latest national accounts.
And the new figures show the outlook has become much worse.
The forecasts were presented in the past fortnight to a meeting of the Joint Economic Forecasting Group, which combines representatives from the Prime Minister's Department, the Reserve Bank, the Finance Department and the Australian Bureau of Statistics. It is chaired by Treasury.
The new forecasts explain the level of concern expressed by new Treasurer Wayne Swan about rising inflation in his speech to the Australian Industry Group last week.
"I warn you we face an extended period of elevated inflation," he said.
Mr Swan refused to comment on the forecasts yesterday, but his speech last week revealed he had been advised by Treasury officials that the underlying rate of inflation would come under pressure over the next 18 months. ...<cont>
http://www.theaustralian.news.com.au/story/0,25197,22962101-601,00.html