Why do we have to raise rates . Surely there is more than one way to skin the cat. Why can't governemnt create capacity by either pulling back some of its waste and improving infrastructure. Last time we had high inflation we were also at war . We are at war again , yet there is no consideration of war and the inflationary pressures this creates for goods and services.

i find it hard to understand why a highly knowledgable commentator like henry would not advocate reducing the supply of money by tightening lending controls. At the moment it seems you can get credit for anything no matter what your situation. I am a believer in good old fashioned austrian economics. You lend money you have for productive purposes that directly add to the assets of australians and to people who are credit worthy individuals. We should be doing things like making sure people save a significant deposit to buy a house, save for the luxuries of life instead of putting them on credit. All commonsense stuff that if it was applied diligently would have the same effect as increasing rates without the pain of rate increases. Just a thought. .

Hi
I understand what you are saying... but I think that individuals should have the choice to decide what they buy, and where they want to spend their money. People are responsible for their own actions based on their risk aversity/preference and desire for future security/instant gratification. This is a natural process.

While we might be at war overseas, I don't think the magnitude was anything significant compared to our gross production and I suspect that that most of our war equipments etc are purchased overseas (from the US) which might not create inflation locally. I would definitely not encourage the RBA to raise rate based on a rather illogical basis/excuse.

While there are a lot of irresponsible spenders, the reality is we shouldn't punish them by advocating a rate hike. Just let them (and the banks) make the decision and allow their own risk assessment and judgement take place. Regards

Raise %rates? to stop spending??
1. the consumers spending r the ones with mtge's less than 60k
(they have the disposable $$$s)
2. the consumers who will be hurt from a %rate rise r those with
mtgs of 250k+ who don't have any disposable $$$s?
3. raising %rates is a blunt instrument! than bludgeons the whole community. and causes a flowon effect to all. (but the spending still goes on) Morons

I've been a subscriber to Henry Thornton's emailed opinions for a couple of years now and , to be honest, I'm finding his arguments to be getting more and more shallow. Australia has some of the highest interest rates of any country on the planet, yet, here's Henry advocating higher rates to slow down our booming economy and reduce the threats of higher inflation. Surely, if everything else in life is inter-connected, why are the economic tools that we should be using here in Australia not also integrated across the economy to achieve desired outcomes?
Dr dolittle is on the right track by asking why can't we use one of the available tools such as by restricting lending. I'd like Henry to tell me why the Reserve Bank and the Australian Government can't get together under certain circumstances and come up with alternative actions to the heavy hand of interest rate rises? For example, a lift in the tax rate would have the same effect as an interest rate rise. Or negative gearing on borrowings for investments could be reduced.
I'm sure that alternatives to rate rises exist as real options to constrain inflation, so why aren't the government and reserve bank working together when the economic gurus perceive an economic problem as posing a threat to our economic stability?