So what are we to make to today’s $30 billion hit to stockmarket values, falling oil, oil and other commodity prices, good sales and profit news from retailer Harvey Norman and airline Virgin Blue and the Reserve Bank’s first Monetary Policy Statement of the year.

Well, the first point is that the market gyrations again prove that the headless herd is off, charging around the world as monetary authorities start to take away the punchbowl of low-cost money, the unfortunate weaknesses of the eurozone are now exposed for all to see, and there are the usual jitters in the US about tonight’s monthly employment figures.

After being burned badly a month ago when the December figures were worse-than-expected, US investors are fretting, with the added frisson of a bailout of risky investments such as commodities and shares by hedge funds and the like.

As well, the sell down is probably a good thing because it could rid investors (and especially the big US and European banks) of the notion that the good times, and bonuses, are back.

It has nothing to do with the outlook for Australia over the next one-to-two years, as detailed by the RBA this morning. In fact the RBA points out that while the risks to the economy are finely balanced at the moment, it is a touch more worried by the possibility that our recovery might grow more strongly than expected, causing rapid wages growth, higher inflation and bottlenecks.

“Perhaps the most likely scenario in which growth and inflation are both significantly higher than expected is one in which confidence continues to build on the back of a further pick-up in commodity prices and there is a larger increase in investment in the resources sector than currently expected.”

And on the downside:

“The most likely scenario in which growth turns out to be much weaker than the central forecast involves a significantly slower recovery in the world economy than currently expected.”

A classic example of economic “on the one hand, on the other” forecasting. But the bank sees a better quality growth with inflation up a touch, but still under control and within the central bank’s target range of 2-3% over the cycle.

Despite this, there now usual the knee-jerk reaction in some reports was along the lines of “rate rise looms,” again.

The RBA lifted its growth and inflation forecasts for the next year to 18 months by a touch and its central forecast is for the economy to grow at about 3¼–3½% in  2010 and 2011. According to the central bank:

Private demand is likely to strengthen through 2010, with growth in the early part of the year being supported by strong public demand. The improvement in the global economy and the increase in commodity prices are expected to support continuing high levels of investment in the resources sector, and dwelling investment is expected to grow strongly.

While overall growth in the economy is forecast to be reasonably strong, the appreciation of the Australian dollar that has taken place as the outlook for the resources sector has improved will restrain activity in a number of industries that are exposed to international competition.

Underlying inflation is expected to continue moderating in year-ended terms to reach a low of a little under 2.5% in the second half of 2010, before rising a little thereafter.

Inflation expectations remain contained and the effects of the significant slowing in wage growth seen last year and the appreciation of the exchange rate have yet to fully work their way through. Notwithstanding this, these current forecasts represent a modest upward revision to those in the November Statement, with recent data suggesting that the economy starts the current upswing in activity with somewhat less spare capacity than earlier thought likely.

Year-ended CPI inflation is expected to pick up over the next couple of quarters, as the temporary factors that have held it down drop out of the calculations. By late 2010, CPI and underlying inflation are expected to be running at similar rates and consistent with the medium-term target.

No mention in any of this or the risks of a housing price breakout, despite the 13.6% rise in prices last year as outlined in Monday’s ABS house price index.