Inflation hits 3.2%

The CPI came in above market and Reserve Bank expectations, with 1.2% for the quarter to 31 Dec and 3.2% for the year.

It will be interesting to see how Dr Cullen delivers in May, when inflation will be higher than it was last year when he cancelled the chewing gum tax cuts due to inflationary pressures.  How much credibility will you have when you promise bigger tax cuts while inflation is higher, than was the case when you cancelled the far smaller tax cuts.

You see inflation in June 2007 was only 2.0%.  And Dr Cullen has promised that he will not do tax cuts if they are inflationary.  And it only gets worse as the carbon taxes are going to keep pushing inflation and probably interest rates up.

So Dr Cullen may end up cancelling tax cuts once again?

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