The inflation figure that will be released is different than most. It focuses the minds of politicians and economists alike.

Inflation has been falling for the past five quarters, getting closer and closer to the Reserve Bank’s target band.

At the last quarterly reading, three months ago, it was not far off. Inflation came in at 3.6%way down from the top of 7.8%and within sight 2-3% band.

There had been talk of one lower interest rates, soon. It’s a good idea to ease interest rates before inflation actually hits the bandwagon, for the same reason it’s a good idea to ease off the accelerator and hit the brakes before you want to stop a car: changes in interest rates affect things. with lag.

Now there are forecasts that the figure on Wednesday shows that inflation has gone up, maybe to 3.8%maybe to 3.9%or perhaps to 4% or more.

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What politicians have fixed is the possibility that the Reserve Bank of Australia (RBA) will conclude that progress on inflation has stalled and that it needs to push interest rates up at least one more time to ensure inflation returns.

The bank could do that after its board meeting on Tuesday next weekwhen it publishes its quarterly report on where the economy is headed.

Will we see another interest rate hike before the election?

A rate hike in what is now the run-up to next year’s election could do to the Albanian government what a rate hike before the last election did to the Morrison government – it helped push them out of office.

But I think there is a good chance that the Reserve Bank will not push interest rates up, even if the inflation rate is high, for a number of reasons.

One is that the Reserve Bank one has forecast inflation of 3.8% in the year to June. Inflation fell to 3.6% faster than expected in March, and a return to 3.8% will bring things back to where it expected to be.

What will matter more to the bank is what is driving inflation. Already in June, the bank’s new deputy central bank governor told us about his thoughts about it.

Andrew Hauser took up his post at the Reserve Bank in February, after a career helping to set interest rates at the Bank of England.

He noted that inflation in the price of goods was on the way down faster than inflation in the price of services, but said it was not unusual. In most countries, the images looked like “incredibly similar“.

It may be that high prices took “a little longer” to push inflation in the prices of services than goods. If so, the correct response would be to “hold your nerve” and note that services inflation has fallen but in a “somewhat uneven way”.

Some prices are outside the RBA’s control

The other point Hauser was particularly keen to make is that prices for many services are “administered” – that is, set by the government or a court.

The prices of childcare, hospital care, electricity, water, gas and public transport are largely administered. They are beyond the scope of the Reserve Bank to influence by moving interest rates.

It was “an interesting question”. Should the Reserve Bank remove these prices from the measure of inflation it targets, given that it cannot target them, and just target the rest? Or should it push the rest down “a little further” to bring overall inflation back to target?

Inflation in other prices is falling

Hauser spoke as if someone calculated the rate of inflation on just the things the Reserve Bank could influence, they would find out that it was already very low.

So this week, ANZ Bank economist Blair Chapman did it – and that’s what he found. Inflation in the prices that the Reserve Bank could easily influence was already back within its target band.

Inflation in other prices – in administered prices, or prices automatically indexed to past inflation – remained above the band, but was declining.

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And Hauser did another thing that he thought was extremely important to him, as a new arrival from Britain: Australia is not the UK.

In the UK, the Bank of England’s primary objective is to bring inflation back to target. Everything else is secondary, subject to the overarching goal, including supporting economic growth and employment.

In Australia there is a “more balanced target”.

Full employment weighs just as much

Here the Reserve Bank has two goalsneither trumps the other.

One is “consumer price inflation between 2% and 3%”.

The second is “sustainable and inclusive full employment where everyone who wants a job can find one without looking too long”.

The Reserve Bank has no right to put one before the other.

Australia has chosen to give more weight to employment than Britain, and Hauser said “to be honest, so far that strategy has worked”.

The number of jobs created is just huge. Sometimes people talk about not celebrating success enough; this is an incredible achievement. When you think about adjustments of this magnitude in the past, they have always involved very, very sharp adjustment in the labor market.

Hauser likes what he sees about Australia. There’s “not much not to like here”.

If the price of Australia’s focus on jobs is that “services inflation takes a little longer to come down”, he gives the impression he is not too worried.

When it makes its decision next Tuesday, the Reserve Bank will be concerned not so much with where inflation has been (that’s what this week’s figures will tell you), but where it is going – which is probably down.

And it’s going to be about where employment is going, which is probably also down given very weak economic growth.

If Wednesday’s figures show that inflation is alarmingly high, the Reserve Bank will have no choice but to raise interest rates next week. But otherwise, it is likely to hold its nerve and watch inflation continue to fall.