The question we want answered is whether the growth slowdown under way will be another mid-cycle correction as in 1996 and 2001, or alternatively the long-predicted business cycle recession, last seen 17 years ago in the recession we had to have? Unfortunately corrections and recessions can look similar in their initial stages.

Wayne Swan today called the news that Wizard Home Loans had cut its variable rate from 9.54 to 9.29 per cent a “wonderful weekend surprise” and said other banks would soon have no choice but to follow. Mr Swan said banks had passed on previous official rate rises “in a nano-second” and should pass on any cuts just as quickly.

Kevin Rudd is determined to be different, to live up to his promise of being a fresh politician who not only has new ideas but also sticks to what he says. What’s more, he is not just making this comparison with John Howard and the previous government.

Although he ruled out a direct challenge for the Liberal leadership, the former treasurer did not answer any questions on whether he would accept an overture to accept the leadership if Brendan Nelson quit. Mr Costello had previously indicated to colleagues that he might enter the fray if Malcolm Turnbull launched a challenge against Dr Nelson.

It would appear that some RBA board members were concerned that, while inflation remained high, the risk of a wages breakout was still prominent. There were two main arguments that the board grappled with: one, naturally, was the weakening growth prospects and the likelihood of a very weak set of national accounts.

The Reserve Bank board was told that the next set of economic growth numbers for the June quarter, published early next month, would be weak and show the economy’s slowdown could become too rapid. “On these considerations, a case could be made for an early reduction in the cash rate,” its monthly statement said.

The Federal Treasurer today agreed that Australia’s financial institutions are “certainly independent” of the government. “But… when the official interest rate goes down… then borrowing costs should follow, it’s really that simple,” he told ABC Television.

If the banks ignore all the free advice about how easily they can afford to pass on an official interest rate cut, the Rudd Government will find itself under pressure to find some way to make good on its threats.

The nation’s lenders have in the past year lifted interest rates faster than the Reserve Bank, taking the standard variable mortgage rate close to 10 per cent, as the fallout from the sub-prime crisis in the US raised their own cost of borrowing funds.

Underscoring the Rudd team’s pre-election hints it could actually do something about the rising cost of living, the government is promising to introduce some reforms designed to improve competition amongst supermarkets. But the main drivers of inflation in the grocery sector are issues the government has little or no control over.