Monetary Policy

2024
The RBA's conflicting statements on uncertainty and accountability expose a dangerous pattern of misguided forward guidance and unlearned lessons, threatening its credibility and effectiveness in controlling inflation.
As the Australian government attempts to manipulate inflation metrics through targeted spending, the RBA finds itself in a balancing act between economic stability and political pressure, echoing historical tensions between Nixon and the Fed.
A closer look at the recent market rout reveals underlying concerns about Australia's economy, and that the RBA's next moves will be as crucial as ever.
It's probably too late in the cycle to hike rates any further when what's desperately needed is tax, spending and regulatory reform.
An independent Reserve Bank of Australia is crucial for economic stability and low inflation. However, a big-spending Budget and attempts to politicise the central bank would jeopardise its independence, leading to higher inflation.
The yen's collapse has made Japan a tourist hotspot, but it has also sparked crisis fears. While a full-blown crisis is unlikely due to Japan's relatively low interest costs and its ability to raise taxes, an ever-aging population and repeated policy missteps are only increasing the risks.
Australia risks "sticky" inflation if real wages start to outpace productivity, requiring higher rates longer and job losses as businesses start to adjust on the employment rather than not wage margin. Continued fiscal deficits also fan future inflation risks.
My recent FOI showed that the RBA Board was warned about the risks of QE but appeared to ignore those concerns, ultimately leading to huge losses with minimal benefits. The fiscal cost alone looks to be well over $50 billion, or more than $5,500 per household – a massive policy blunder.
Queensland's Premier Steven Miles appears to be out of his depth. Last week he called for RBA rate cuts, and announced reviews into supermarket pricing and homelessness. On Sunday he released a rental package that risks making the situation worse.