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Inflation flags rapid increase in cost of liv -

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Inflation flags rapid increase in cost of living

Broadcast: 23/07/2008

Reporter: Josie Taylor

Inflation figures may have confirmed the cost of living is increasing faster than any time in the
last 12 years. The Federal Treasurer says it is a global problem the Opposition blames inept
economic management.


WAYNE SWAN, TREASURER: This is a very significant figure. The truth of it is there in the figures.
And there's no point in trying to sugar coat it at all. It's a very substantial problem.

JOSIE TAYLOR: Wayne Swan says it's a big domestic issue that he inherited, and he's blaming global
forcesm, the credit crunch, and high oil prices

WAYNE SWAN: But these aren't prices that are in control by the Federal Government. They are set
globally and they are putting a lot of people, including a lot of business, under pressure.

That's why we fought so hard to deliver the tax cuts in the Budget and the additional assistance in
the Budget to provide some relief.

JOSIE TAYLOR: But the Opposition says the Government's first Budget added to inflationary
pressures, with new taxes on pre-mixed drinks, health insurance and luxury cars.

MALCOLM TURNBULL, SHADOW TREASURER: Every single inflation result from now on since that Budget,
every single interest rate rise, is owned by Wayne Swan.

He is creating the environment that puts upward pressure on inflation and that puts at risk the
homes, the living standards, the jobs of Australians all around this country.

KATIE DEAN, SENIOR ECONOMIST, ANZ: It really is a combination of global and local factors. You
could certainly argue that, you know, the global economy is providing an inflationary impulse into
Australia at the moment, but likewise we are seeing increases in a broad range of domestic goods
and services and these are not being driven by tax rises alone.

JOSIE TAYLOR: Economists recently gave home owners some hope the next time interest rates moved
would be down. That now seems unlikely. Instead some economists are predicting a rate rise could be
on its way.

MICHAEL BLYTHE, CHIEF ECONOMIST, COMMONWEALTH BANK: I certainly think that's the direction of risk.
It really comes down to what side of the economic debate you're sitting on; you either think the
economy will keep slowing in which case inflation will probably pull back from here.

Or do you believe the commodity story and the big income boost that will be flowing through the
Australian economy courtesy of recent increases in coal and iron ore prices, will that outweigh the
negatives at work? And we tend to favour the commodities story.

Maybe we don't get another rate rise, but I think the speculation that has been building over the
last few weeks about the possibility of rate cuts is looking a bit misplaced at this point. I think
the foot will be kept on the brake until pretty clearly that slow down the Reserve Bank wanted to
see in the inflation numbers is showing up

JOSIE TAYLOR: And if the Reserve Bank holds firm, the Treasurer warned the big banks to think
carefully before raising rates independently.

WAYNE SWAN: They have a choice between their shareholders on the one hand and their customers on
the other. We do need to have an eagle eye on competition in the sector and we do.

JOSIE TAYLOR: Some words of comfort, perhaps.

Josie Taylor, Lateline.