Australia's economy

It seems that Australia's economy is being pulled in two directions. The US and most of the rest of the world's economies are slowing down, while demand for Australia's mineral resources remains strong.

The dilemma I can see is that the Australian government only has two main "controls" on the economy:

• interest rates: this impacts only around one quarter of home-owners with large mortgages
• expenditure: how much government spending 'primes' the economy

In the past, the government had two other controls;

• exchange rate: prior to the 1980s, the foreign exchange rate was set by the Australian government.
• tariffs: these were more varied in the past, and as such provided more control.

The Reserve Bank should now be cautious after this most recent increase, and see how the multiple forces impact Australia's economy.