THE DISTILLERY: Shock and awe

Thunk, clunk, crash, rattle, roll, yell. No, it's not Super Glenn, inflation fighter extraordinaire, getting changed back into his business suit in Martin Place. It is in fact the sound of Liberal Party strategists, business economists, political writers and finance columnists throwing out six days of easy headlines, one liners and assorted columns after the better than expected inflation figures for the June quarter. Shock, horror, no rate rise looms!

That quiet applause you can hear is for the Reserve Bank staff taking a bow for the rare inflation rate forecast published in the minutes of the July 6 board meeting, which was spot on. "Consumer price inflation data for the June quarter would be published on 28 July, and the staff expected them to show the underlying rate of inflation continuing to moderate in year-ended terms, to be below 3 per cent for the first time in three years. CPI inflation was, however, expected to rise to a little above 3 per cent, partly due to the effects of higher taxes on tobacco," the minutes said.

For Fairfax Online's Michael Pascoe the outcome wasn't as surprising as some would have us believe: "Here's the surprising thing about yesterday's Consumer Price Index: it was a surprise. The Reserve Bank went to unusual lengths last week to (correctly) forecast the result, but either no one was listening or the market just doesn't believe what the RBA tells it."

The Australian's David Uren said: "The latest inflation figures show the Reserve Bank's six increases in interest rates since October have worked."

The Melbourne Age's Peter Martin told readers "Julia Gillard will go to the polls with the ultimate economic double – falling inflation and falling unemployment – after a surprise dive in inflation removed the prospect of higher mortgage rates in the lead-up to the election."

And Ian Verrender of the Sydney Morning Herald: "Few economists are prepared to put their money on the timing of the next official rate rise. But that is neither here nor there. For the next rise in interest rates will come from the banks. And they will move soon after next month's federal election, giving the Reserve Bank more breathing space on its next move."

Stephen Bartholomeusz of Business Spectator found a dark side. "The flip side of weaker-than-expected inflation, however, is usually weaker-than-expected growth. Had there not been an increase in the tobacco excise, the increase in the CPI would have been halved, which would suggest that the economy is still struggling to generate any positive momentum. That would fit with both the anecdotal evidence from retailers and the sales numbers now flowing from them."

The Australian's Michael Stutchbury had his teeth well and truly gritted, and ploughed on towards the end of the year: "But the reprieve is likely to be temporary if – as the Treasurer maintained yesterday – the China boom keeps pumping up Australia's fast-lane mining sector. By late this year, Stevens is still likely to lift his 4.5 per cent 'neutral' cash rate into 'restrictive' territory." And various Australian Financial Review writers queued to make a similar point: fine now, but later in the year?

But The Age's Tim Colebatch had a less gloomy take: "The fiscal stimulus that has propped up the economy for 18 months is winding down. Global commodity prices are coming off their peaks, reducing export income ahead. And the Reserve's six rate rises since October have yet to fully impact on consumer demand. This rate pause could last quite a while." Mortgage owners and small businesses hope so, but those on fixed incomes?

Elsewhere, The Australian's John Durie saw an important message in the record $18.5 million fine against Telstra yesterday. He said it was "timed superbly to underline the importance of the Government's NBN project. It comes on the eve of Communications Minister Stephen Conroy's communications policy launch, which will include an extension of the national broadband network, but more to the point, it highlights Telstra's extraordinary arrogance. The size of the fine was peanuts for a company which will next month report a profit of circa $3.9 billion for the 2010 year, but the judicial confirmation of literally years of complaints about Telstra's tactics was a breakthrough." And where is Sol Trujillo?

But Terry McCrann, the business columnist for the News Ltd tabloids, is not as enthusiastic as Durie about the fine. He thinks it stinks: "But the fine imposed on the big Telco yesterday was outrageously out of touch with the substance of both the 'crime' and any actual harm to the 'victims'. Telstra's been given the financial equivalent of 25 years' hard labour for the equivalent of tax avoidance. And I used that word deliberately – avoidance, not evasion. Give me – or rather Telstra – a break. This is the third highest anti-competitive penalty ever imposed in Australia. This is supposed to be up there with the great anti-competitive crimes of the 20th century!" Don't hold back son, let it all come out.

Matthew Stevens in The Australian waxes lyrical about what the Chinalco-Rio Tinto signing in Beijing today means for the Simandou iron ore project. Rio used to have all the prospect – now it has a bit and that is under threat. Stevens points out: "Confirming Chinalco as partner and China Inc as financier reduces to all but zero the risk that the Middle Kingdom might become a competitor in any current and future stand-off with the Guinean Government over ownership of title to the project."

And despite our low inflation figures, the "good" European bank stress tests and various other bits of info, Chris Giles, economics editor of the FT, is not convinced that the global economy is healthy: "Double dip. It is the phrase on everyone's lips – and it makes many of those lips tremble. With the shock of 2008 fading into memory, the moment of reckoning for the global economy has arrived. Will the bounce back from the nadir become established as a return to sustainable expansion – or will initial relief mutate into the despair of a renewed slowdown?"

And the very colourful investor Jim Rogers is now Jim Rogers, Bear, according to this report: "Mr Rogers, the respected currency trader and hedge fund pioneer, cautioned that when the downturn takes hold 'the world is going to be in worse shape because the world has shot all its bullets'. Speaking in an interview with business television channel CNBC, the septuagenarian investor said that 'since the beginning of time' there has been a recession every four to six years, and that means another one is due around 2012." Great, just when it was safe to go out at night....