Inflation targeting anchors inflation expectations, which are not within the sphere of control of the authorities, but can only be influenced over time by consistent policy. As public distrust of inflation figures will feed through to inflation expectations, this paper highlights pilot studies measuring the credibility of inflation in terms of an inflation credibility barometer. Despite initial discouraging results, the conclusion is that knowledge and information improve the credibility of inflation, but only one inflation rate (ideally the one used for inflation targeting purposes) should be communicated. Moreover, the rate used for targeting purposes should be specified with ease of communication in mind.

Inflation targeting anchors inflation expectations, which are not within the sphere of control of the authorities, but can only be influenced over time by consistent policy. As public distrust of inflation figures will feed through to inflation expectations, this paper highlights a comparison of the credibility of two different measures of inflation in terms of an inflation credibility barometer. In a comparison of the barometer results to the analysis of inflation perceptions reported by other central banks, it is concluded that the barometer delivers superior results. The main recommendation is that respondents should be requested in a follow-up study to indicate whether they attach a higher degree of credibility to the overall inflation rate or the rate used for targeting purposes.

Since the dawn of democracy just over 20 years ago, government has financed a massive expansion of services to all South Africans, with a focus on the poor. We have done so in a sustainable way, ensuring that our public finances remained healthy so that we could continue building the society envisioned in our Constitution. Today, we are at a turning point. The world economic recovery remains shallow and structural challenges in our economy have contributed to weak economic growth. This has serious consequences for tax revenue, and our ability to continue funding social and economic programmes. This year we anticipate GDP growth of 1.4 per cent. While growth is expected to reach 3 per cent in 2017, this is well below the country's potential and has placed the public finances under increasing pressure. Rising debt levels, if left unchecked, would absorb more and more of our spending. The end result would be less money to spend on improving the lives of our people. The 2014 Medium Term Budget Policy Statement provides a roadmap to safeguard the public finances. In response to a worsening debt outlook, government proposes a fiscal package that reduces the expenditure ceiling and raises tax revenue over the next two years. This will reduce the budget deficit and stabilise debt, which is now set to reach R2.4 trillion in 2017/18. Two years of fiscal consolidation will put the public finances on a sustainable footing. We will also approach budgeting with a greater focus on long-term expenditure planning and alignment with government's policy objectives. In considering these proposals, we must emphasise that restraining expenditure growth will not compromise front-line services. National, provincial and local government will need to continue identifying savings and improving the way they spend money. Key social programmes will be protected. Government will continue to roll out its capital investment programme. We will encourage private-sector participation in infrastructure delivery. While expenditure ceilings are being reduced, the budget will continue to grow in real terms. Government will spend R4.4 trillion over the next three years. Allocation of these funds will be in line with the medium-term strategic framework, which gives expression to the National Development Plan. I would like to thank the President and all of my Cabinet colleagues for their contributions to shaping the proposals before us, as well as the Ministers' Committee on the Budget, which has brought tremendous insight into the process. I would also like to acknowledge the officials of the National Treasury, who are working with their colleagues across government to ensure that our public finances remain sound. The choice we face in considering these proposals is a difficult one. But we believe that this course can no longer be postponed.

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is 'n senior dosent in die Departement Ekonomie aan die Universiteit van Suid-Afrika (Unisa). Hy begin sy loopbaan in 2005 as junior dosent by die Universiteit van Pretoria en is daarna na die privaat sektor waar hy nader kennis gemaak het met finansiële markte as eko noom van die Efficient Group. In sy navorsing fokus hy op verskeie ekonomiese velde insluitende inflasie, huishoudelike finansies, volhou bare ontwikkeling en die finansiële markte. Jannie rossouw is hoogleraar aan die WitsBesig heidskool aan die Universiteit van die Witwatersrand. Gedurende sy professionele loopbaan was hy onder meer 'n Senior Adjunk-hoofbestuurder van die Suid-Afrikaanse Reserwebank. Sy navorsing fokus op die volhoubaarheid van SuidAfrika se fiskale posisie, inflasie en die geskiedenis van die SA Reserwebank.