Biggest risk in Australia is inflation

Turmoil in world markets not as important as handling record 16 year fastest inflation acceleration in Australia.

While interest rates may look good to cut in the hopes of easing Australia through the failing global markets, it is highly unlikely to happen. Instead, the country will likely increase rates.

This is due to the continuously increasing inflation here. In fact, recent reports position the current rate of acceleration of core inflation the fastest pace in 16 years.

Experts warn that the US economic slowdown just is not as important to the country as is inflation here. According to 19 out of 26 economists surveyed by Bloomberg News, as reported in Bloomberg News, the board will likely increase the benchmark lending rate a quarter point. This would move it to 7 per cent. The board meets on 5 February to make this decision.

The Reserve Bank of Australia has been working to cut inflation, over the course of the last year. They raised interest rates twice in 2007 to the 11 year high of 6.75 per cent.

There is no doubt that the global market cool down will affect Australia's economy, but economists believe that the larger problem here is ever increasing inflation. Inflation here is spurred by increasing energy costs, financial services and housing costs.

In the fourth quarter of 2007, inflation here rose 1.1 per cent over the previous quarter. This moved for a higher annual increase at 3.8 per cent. This is the fastest increase since 1991.