Importantly, we believe that if oil prices drop back from present levels then CPI inflation may already have peaked year on year and should be on the way down over the rest of 2006 - potentially rapidly if oil reverses significantly.
They are concerned about inflation first and foremost but they already know that was going to happen because of petrol.
That was much worse than expected, and the underlying numbers look weak across the board.
These data back the RBA on hold and with a neutral bias for now, with the next move still looking down to us, albeit not until much later in the year.
The moderation is certainly very slow in arriving, even allowing for the usual lag in data, and these sectors' problems are clearly being mitigated by a pick-up in business investment and commodity exports.
With the import side holding up more strongly than exports for now, the Reserve Bank is unlikely to respond with lower interest rates in the near term.
The residential housing market is well off its peak now. The Reserve Bank remains on hold for now with domestic demand moderating.
Since the Reserve Bank of Australia raised rates in March, the housing market has just been going sideways. Rates are on hold until the third quarter of this year.
For the Reserve Bank, this is likely to significantly dampen any thoughts of rate increases going forward. With higher oil prices and a weakening housing market, employment growth should be much more moderate ahead.
This report backs the Reserve Bank remaining on hold ahead. Weakness in retail and transport is being mitigated by a pickup in mining and construction.
The odds of a rate increase on Oct. 27 have shortened. The Reserve Bank is extremely worried over whether the economy will slow rapidly enough ahead to cap obvious inflation pressures. It looks increasingly like it will not.