“Don’t worry” about inflation

You can stop worrying about inflation.

That message emerges very clearly from a new survey that was conducted jointly by the Westpac Bank and the Australian Chamber of Commerce and Industry.

Many Australians are, indeed, worried about the prospect of inflation surging, as a result of the Federal government’s three stage stimulation package, which involves heavy borrowing and big sepnding programs.

Those programs, essentially, are the government’s response to the threat of recession – or worse – arising from the global economic crisis.

These matters, of course, are highly sensitive, politically.

They are at the heart of the debate between the government and the opposition, over Australia’s response to the challenges the crisis is presenting.

The survey partners, clearly, didn’t want to be seen to be seen standing  either on one side, or the other, in that debate.

So they chose their words carefully.

But their assessment was unmistakable.

The survey partners said that although business confidences has improved, activity levels remain weak and unemployment is likely to rise.

“Both prices and costs are expected to fall,” they added.

“Contrary to the commonly quoted inflation scare, the greater risk is deflation.”

They said that risk would emergee as excess capacity and rising unemployment, both in Australia and overseas, contained any inflation pressure.

There is good news for homebuyers, too, in comments the bank made on  the results of the survey.

“Westpac is surprised by current market pricing which is pointing to rate increases of around 150 basis points by the end of 2010,” the bank said.

“It is far more likely that rates can fall further rather than rise in the current environment,” it added.

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