Wake up RBA!

Thu, 06 Nov 2014  |  

The statement from the RBA that accompanied this week's 'rates on hold' decision had the flavour of a stock broking spiv – "don't worry mate, things will be ok"; "it's just a bit of a blip in the unemployment rate and maaate – don't worry about wages growth at all time lows."

"Inflation? Ha it's right on target. Whoa!"

"And commodity prices – well buster, they are still higher than there were when Jesus played half back for Jerusalem, so chill."

And so it went.

Today's labour force data are a rocket for the RBA and its misreading of the economy. Some stark facts show how the sub-optimal performance of the economy in recent months has hit the labour market.

  • Employment has increased by just 31,900 in the 7 months since March (a dismal average of 4,600 a month) and in the last 3 months, employment has fallen 8,600.
  • The unemployment rate, at 6.2 per cent, remains equal to a 12 year high and is up from 5.7% in mid 2013 and just over 5 per cent in 2012.

To be sure, the economy has not hit a brick wall since its robust start to 2014 and this may explain the RBA missing the magnitude of turning points in the economy. But miss them it has.

Having rubbished the idea of macroprudential policy to cool the only warm part of the economy, house prices, the RBA is allowing the unemployment rate to escalate, wages growth to plummet and job creation to be stuck in quicksand and all for the sake of fighting some house price pressures in Sydney.

This is an extraordinary way to run monetary policy.

All the while the RBA, schizophrenically, was lamenting the fact that the AUD was not matching the free-fall in commodity prices yet all it did was bicker and complain, a bit like a Collingwood supporter when the umpires give a free kick against the might Magpies.

Time's up folks.

If Australia is to head off a sharply higher unemployment rate in 2015 and avoid joining the disinflation camp, it needs to cut interest rates soon. It should have already done so, but it now looks like an interest rate cut in December would be a prudent step to fixing the problem of an economy growing too slowly and with it, rising unemployment. It would be foolish to say the RBA needs to cut 50 basis points, so I wont.

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Wed, 29 Jul 2020



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The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

Tue, 07 Jan 2020

This article first appeared on the Yahoo Finance web site at this link: https://au.finance.yahoo.com/news/the-governments-test-in-2020-220310427.html   


The misplaced objective of the government of delivering a surplus, come hell or high water, has gone up in smoke

For many people, the cost of the fires is immeasurable. 

Or irrelevant. 

They have lost loved ones, precious possessions, businesses and dreams and for these people, what lies ahead is bleak.

Life has changed forever.

As the fires continue to ravage through huge tracts of land, destroying yet more houses, more property, incinerating livestock herds, hundreds of millions of wildlife, birds and burning millions of hectares of forests, it is important to think about the plans for what lies ahead.

The rebuilding task will be huge.

Several thousands of houses, commercial buildings and infrastructure will require billions of dollars and thousands of workers to rebuild. Then there are the furniture and fittings for these buildings – carpets, fridges, washing machines, clothes, lounges, dining tables, TVs and the like will be purchased to restock.

Then there are the thousands of cars and other machinery and equipment that will need to be replaced.