What is interesting is to use the latest inflation data to recast inflation forecasts into 2015 and 2016. With the unemployment rate on the rise, with wages growth falling to levels not seen since before the Whitlam government was in power, it is easy to frame a forecast scenario where inflation will be lower over the next 18 months, rather than higher.
Throw into that mix the free fall in the terms of trade, deflationary pressures from Europe, sharp falls in inflation in China and the world more generally, and the scenario for the RBA missing its inflation target on the down side loom large. This time next year, underlying inflation could be testing record lows around 1.75 per cent.
Which is why the RBA needs to be cutting interest rates. While its rhetoric and constant briefing of market economists has them all singing from the same song sheet, the next move in interest rates is up, another few months of soggy local economic data, a further uptick in unemployment, downtick in wages growth and further confirmation that inflation is falling, should see it change its mind early in 2015. That's when the next interest rate move – down – it likely to occur.