Marco Business 180 degrees wrong
The good people at MarcoBusiness have made a mistake. I suspect they inadvertently took some of my comments regarding RBA policy out of context.
They cut and paste a lot of my column from Business Spectator this morning (here
and included it in their column here:
They say that:
- “The “Kouk” is largely known as a Labor guy so some of this has to be taken as rhetorical. But still, such optimism is highly questionable. The RBA is not cutting interest rates to these levels because we are entering economic nirvana. On the contrary, we are entering the end of the mining boom much earlier and at much lower levels than earlier assumed.”
A couple of points. I am not sure any political predisposition means that my work, which in terms of RBA policy is widely regarded as some of the best going around, is “rhetorical” simply because it presents a glowing endorsement of the economic policy settings of a government that happens to be Labor. It begs a question of what is an ideal scorecard for the economy? I judge that to be conditions prevailing about now. Others including Macro Business may have a different view, but I and most good economists reckon it is easy to argue that 3%+ GDP; 2% CPI and 5 – 5.5% unemployment rate is in fact “near perfect”. They are “near perfect” because these macro indicators are on any level good, and even more importantly, sustainable.
To the other point in the Macro Business article – nowhere ever have I said that “the RBA is cutting interest rates … because we are entering economic nirvana”. This verbalising of me from Marco Business is unhelpful.
A simple reading of my words this morning and over years of covering the RBA is that its pragmatism and flexibility are praiseworthy.
This morning I wrote:
- “and now [with] the RBA moving to a more accommodative monetary policy stance, the scenario for the Australian economy through to the end of 2013 is annual growth in real GDP bouncing around 3%, plus or minus a few tenths of a per cent, underlying inflation (excluding the temporary effect of the carbon price) running in a 2.0 to 2.5% band and the unemployment rate ticking up towards 5.5% but probably not going much higher than this.”
- “It is a near perfect economic scenario that will be enhanced if even easier monetary policy down the track can lift growth sufficiently to see the unemployment track back to 5% or even a touch less.”
In other words, the RBA rate cuts are helping to sustain the near perfect macro picture for the economy, and not as Marco Business claim, that the near perfect economy is allowing the RBA to cut.
180 degrees wrong Marco Business.