Did the Reserve Bank tighten too late, or wasn't this week's rise enough, and at least one more increase to 7.25% will be needed to break the back of inflation.
According to a survey of economists by Bloomberg, the RBA may raise the cash rate again to put a lid on inflation.
But according to at least two major investment banks this week, the rate rises and the outlook for inflation have raised the chances of the Australian economy suffering a hard landing.
These were comments from Goldman Sachs JB Were and UBS, and their analysis makes a lot of sense.
And, judging by the cut overnight by the Bank of England of 0.25% to 5.25%, and comments from the European Central Bank that it may reverse course and cut its 4% rate, we in Australia seem to be alone in the developed world with rising rates.
Bloomberg quoted one economist, Mark Rodrigues, a senior economist at the ANZ in Melbourne as saying"Another rate increase is coming, most likely in May. The Reserve Bank has clearly been surprised by the strength of inflation and the resilience of demand in the economy.''
Economists and others point to comments like this from RBA Governor, Glenn Steven as backing their case: "Inflation is likely to remain relatively high and will probably rise further". Further, comments such as "significant inflation pressures, strong demand, high capacity utilization and shortages of suitable labor'' were also used.
But monetary policy is now on verging on the restrictive and perhaps another rise may not be needed.
Borrowing costs are now at an 11-year high for home buyers (who are not the problem), business and credit cards and personal loans. Margin calls are being made daily by lenders to investors and rates for these loans have spiked.
The question perhaps should be, did the RBA cut too late.
This week's building approvals figures for December and 2007 show some evidence of that.
December's fall in private dwelling approvals of 11.6% was the biggest on record, apart from the GST induced drop in late 2000.
That the fall happened in both private and non-private dwellings is a giveaway.
And yesterday another piece of news that adds to the feeling that the bank may be pushing on a piece of string.
Brickworks, the country's major brickmaker is slashing production in NSW by 100 million bricks a year by mothballing two kilns at its Horsley Park complex in Sydney in response to a reduction in demand for bricks in the state.
The company's CEO, Lindsay Partridge said in a statement: "The housing downturn in NSW is now of a duration and extent that it can only be compared to the downturns of WWII or the Great Depression.
"Further interest rate rises and poor weather have resulted in there being no signs of house sales improving in NSW".
"One kiln at each of Plant 22 and Plant 23, out of a total of four kilns at the complex, will not recommence production on an indefinite basis. The Horsley Park plants along with the two other plants in NSW have been closed for maintenance and stock control since late December 2007 with a plan to recommence production in February.
"Unfortunately this is a decision that we could no longer avoid. The move will result in 36 long term employees being made redundant and will reduce our production capacity by 100 million units per annum, enough bricks to build 10,000 homes.
"It would seem inconsistent to most people that during a housing shortage and rising rents that construction of new houses in NSW is at record lows," Mr Partridge said.
This raises another question: has the RBA lost its most important measure of when monetary policy starts working: the level of demand for housing.
If anything, November's interest rate rise and other rate rises for non-bank lenders (and their withdrawal from sections of the home lending market) played a part in the very sharp fall in December.
If the fall in approvals continues into the new year, then the bank might normally conclude the higher rates are working. (Housing finance figures for December next week will be another important indicator to watch.)
But the reality is the bank's rate rises will not have an impact on oil and petrol prices, on the strength of demand for scarce resources and labour from the mining and resources industries and its many suppliers, nor will it have an impact on the housing industry, except to push up the cost of housing and rents.
Housing costs, rents and financial costs now make up a significant part of much of the pressure forcing inflation higher: the RBA and the banks have just fed in another upward push with this week's increases (The AMP Bank went up 0.33% yesterday!).
Short of ending the resource boom, plunging housing and non-resource construction into a recession and forcing retail sales to go backwards, there's not much the bank can really do in all honesty.
The battle for control of Rio Tinto to create a huge global mining house will push significant sections of the mining industry even further outside the RBA's influence.
But the real concern for some economists remains the state of the housing industry.
This is what Goldman Sachs JBWere had to say about the housing figures this week:
"This is a stunningly disappointing result. Yesterday's resurgence in house price inflation reflects the acute undersupply of housing in Australia, particularly in NSW. Unfortunately, today's approvals data suggest that this supply-demand imbalance is likely to become more acute, especially with the RBA's rate hike to further crimp the affordability of building new housing.
"As a result, we believe that a meaningful recovery in dwelling construction is likely to be delayed to the end of this year at the earliest…
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