Henry applauds the
ceasefire in Lebanon. Opinions on the issue of
who won are mixed. The
Economist says it is uncertain: “As a ceasefire
takes effect in Lebanon, and thousands of displaced
civilians begin to return home, it is unclear whether the fighting is really
over. Neither side can claim a military success”. On the other hand,
“Hezbollah leader Sheikh Hassan Nasrallah said today his guerrillas had achieved
a “strategic, historic victory” against Israel, and suggested Lebanese and international
troops could not protect Lebanon
alone.”

Here is the view from
Tim Hames (reprinted by The Oz from The Times) on why Israel has gained in several ways from this
mini-war:

  • “First, the damage inflicted by the Israeli Defence Forces on
    Hezbollah’s infrastructure and resources is far, far greater than the equivalent
    harm that it has suffered.”
  • “Second, Hezbollah has deployed a huge
    percentage of its missile arsenal to very little advantage.”
  • “Third, the
    administration in Lebanon, which had ostentatiously refused to send its soldiers
    to the south of that country for the past six years, has been obliged to pledge
    to the UN that it will now do so.”
  • “The wider strategic consequences of
    these recent events are yet more significant. Hezbollah was, until July 11, a
    problem exclusively for Israel. That dilemma has been
    internationalised.”
  • “The final dimension to this saga may nevertheless
    prove the most compelling. The past few weeks have exposed Iran’s role as
    the political patron of terrorism as well as the extent of its ambitions to
    shape Islam in its image.”

The price of oil
fell overnight, with a barrel of light crude on the New York Mercantile Exchange
down 82c to $73.53 at the close of trading, and this should help Asian equities
today. Gold, which is generally seen as a safe haven during times of
international tension, was down $5.10 to $639.30.

As we noted
yesterday, Treasury Secretary Ken Henry has publicly signalled that Treasury is
concerned at the risk of the economy overheating. John Garnaut takes up the
story in the SMH: “The
odds have shortened on a third interest rate rise after the
Government’s top economic official said parts of the economy must be
constrained to avoid a 1970s-style inflation surge. The Treasury
secretary, Ken Henry, a member of the Reserve Bank board, is often
regarded as a ‘dove’ for his preference of lower interest rates.”

Read more at
Henry Thornton.