The "small stick" could well comply and be called a "blunt instrument" -
Certainly as a system for tuning and calibrating the economy it has the attributes of a brain surgeon using a brick or other "blunt instrument" to bash a hole throught the skull and thus gain access.

I am not sure why we "needed" to have a rate rise - the effects of which will be to increase the exchange value, suck in imports whilst depressing exports, increase inflationary pressure on domestic spending and reduce commercial the competitiveness generally.

The RBA should not be in the "business" of second guessing what might happen - when the tools it uses have the capacity to destroy what makes "it" happen (confidence in the future).

Like most economists the author is cautious. I am not an economist but still believe there should be a further rate increase. A 0.25 percent increase is a "small stick" and has very little impact. What it does is herald a further 0.25 percent increase if we - the public -do not curtail our spending/borrowing habits. Higher surpluses is one naswer, but how does Costello spend it is another.
I believe the rates should have been pushed higher last year, but enthusiasm for such a move was dampened by the Federal Election.
The same situation was apparent in the US.The RBA can only do so much - the future of rates lies in Greenspan's hands as he tries to do something about the US twin deficits.

It seems to me that Nicholas Gruen would prefer the interest rate to be zero! As someone with admittedly old-fashioned values, who believes in earning the money first and spending it second, I consider that we have to get away from the current wave of debt-based consumption that threatens to engulf us. If anyone disagrees with this, I suggest you play a game of Monopoly with one change of the rules: Any player can borrow freely from the Bank, under the condition that all other players receive the same advance. In a short time Old Kent Road will be changing hands for $1,000,000,000! The only way to discourage borrowing by consumers in a deregulated economy is to increase intererst rates.

It is a common sense to know the underlying reason for RBA to raise interest rate is to manage inflation effectively. But it is hard to analysis all the factors that affecting inflation. Surly, we can name the few important ones, the housing/construction boom, and shortage of labour, oil price, GDP and oversea market conditions. Since there are so many factors to be considering, I believe trying to manage the economy and inflation through interest rate is a long, difficult and complicate process.
Therefore, I think we can not really blame RBA for “speaking loudly but carrying a small stick”. My opinion ‘is carefulness is better that careless’; a small rise now to test/warn the market is definitely better than a hit with a large rise later on when inflation is out of control.
I believe if RBA is able to manage the inflation effectively over the past decades and show it success in it’s role, then RBA should have the right and support to continue its job in any way that it think is appropriate and necessary.