RBA needs to get off its arse!
by Peter Switzer
This underwhelming and overrated Reserve Bank (RBA) will be tested today and if the majority of economists are right, it will fail, again. That is, it will wait until November to give us our next interest rate cut, despite the fact it’s needed right now.
The Bank always thinks inside the square and is reactive rather than proactive unless a crisis is staring it in the face.
And don’t think this is “typical Switzer — bagging the RBA again”, a Sky News Business survey found 60 per cent economists think there will be no change today but that means 40 per cent agree with me!
Also just about every economist expects one before Christmas and 50 per cent think we’ll see two. So why wait when small businesses, the real estate sector, retailers, manufacturers and even the Federal Treasurer would love to see more buoyant consumers and business managers?
Waiting for inflation data
This economy has slowed down and is still pretty sluggish and that’s why nearly all economists expect a rate cut before Christmas, so why delay?
Well, the economist in Glenn Stevens says “let’s see the inflation data at the end of the month”. This is what the RBA does and that’s why there have been interest rate changes at every meeting since 2006 on Cup Day!
But I’m arguing we need the Big Bank to think outside the square and take the gamble that inflation will be OK — as most economists predict — and start helping to kick-start the economy.
There’s a pathetically safe attitude of the RBA that it needs to see economic weakness — doubting Thomas style — before it acts to fix it. Ironically, a lot of this weakness created by low consumer and business confidence has been partly created by, you guessed it, the RBA’s interest rate policy!
If rate cuts are needed, why wait? If it’s shown in three months that an October rate cut wasn’t needed, then raise them again if inflation threatens. At the moment, we’re sitting in a cold room with rugs around us because we fear power charge increases that could come in two year’s time!
Right around the world we’re looking to see if monetary stimulus in the European Union, the USA and China will help boost economic growth and I can’t see why our central bank can’t be doing more to make the lives of Australian businesses and consumers better.
Think outside the square
When I interviewed former treasurer Peter Costello, who made the RBA independent, he argued that this doesn’t mean the RBA can’t be criticized. He actually said he thought the RBA got its rates policy wrong in 2007 and 2008 — as I was arguing then, as well.
I really hope Mr. Stevens can beat up the cautious economist inside himself and think outside his square mind to push for a rate cut today. I don’t expect it, but I want it.
I could argue that the RBA needs to get off its old-fashioned arse and do something to help the economy, but that would be too rude.
So I will wish good luck to Glenn and I hope you can get outside your comfort zone and that square that restricts your thinking.
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Published on: Tuesday, October 02, 2012
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