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Analysis and Comment (46)

The secular stagnation theory predicts the world will stumble along with anaemic growth and no inflationary pressures for the foreseeable future. The secular stagnation theory predicts the world will stumble along with anaemic growth and no inflationary pressures for the foreseeable future. AAP/William West

Have Australian bankers bought the “secular stagnation” theory?

The major Australian banks have recently cut fixed mortgage rates below 5%. They have done so without any prompting from the Reserve Bank of Australia, which may actually start raising the policy rate…
Pressure for a rates hike is increasing. Pressure for a rates hike is increasing. AAP Image/Jane Dempster

End of low rates in sight as case for interest rate hike strengthens

The CAMA RBA Shadow Board is a project by the Centre for Applied Macroeconomic Analysis, based at the ANU, which asks industry and academic economists what interest rate the Reserve Bank of Australia should…
Rates should stay steady for now, say CAMA economists. Rates should stay steady for now, say CAMA economists. Dan Peled/AAP

Call likely to grow louder for interest rates to rise

The CAMA RBA Shadow Board is a project by the Centre for Applied Macroeconomic Analysis, based at the ANU, which asks industry and academic economists what interest rate the Reserve Bank of Australia should…
Why so negative? Mario Draghi at the ECB. Why so negative? Mario Draghi at the ECB. Arne Dedert/EPA

ECB’s negative rates experiment will buy time, but brings danger

When the European Central Bank unveiled a handful of unconventional monetary policies recently, one above all grabbed the attention. The inception of targeted long-term refinancing operations, preparatory…
Making things black and white at The Bank of England. Making things black and white at The Bank of England. Mark Cornelius/Bank of England

ECB drama highlights the central bank transparency dilemma

When the European Central Bank sent markets reeling yesterday with moves designed to stimulate growth, the 24 people who made that decision could remain comfortable that their exact arguments and misgivings…
Consumer sentiment has fallen since the federal budget while other indicators suggest the economy is in limbo. Consumer sentiment has fallen since the federal budget while other indicators suggest the economy is in limbo. AAP/Dan Himbrechts

Rates should hold until post-budget malaise clears

The CAMA RBA Shadow Board is a project by the Centre for Applied Macroeconomic Analysis, based at the ANU, which asks industry and academic economists what interest rate the Reserve Bank of Australia should…
The economy will react slowly to last night’s budget. The economy will react slowly to last night’s budget. AAP/Lukas Coch

How will the economy react to the budget?

The Abbott-Hockey government is continuing to budget for a deficit. This means it is pumping more spending into the economy than it is taking out. The amount of this stimulus is being reduced; the size…
Business has agitated for change, but is now wary of the negative impact of a tough budget. Business has agitated for change, but is now wary of the negative impact of a tough budget.

The state of Australia: business

In the lead up to the budget, the story of crisis has been hammered home, but there’s more to a country than its structural deficit. So how is Australia doing overall? In this special series, ten writers…
All banking comes with risk, but it could be better disclosed. All banking comes with risk, but it could be better disclosed. Shutterstock

Why your bank account should come with a risk rating

What is the interest rate on your savings account? If you don’t know, you can easily find out. Banks advertise their rates prominently. They want you to know what they’re offering. After all, the interest…
Australia’s economy is showing promising signs, with global events the main source of concern. Australia’s economy is showing promising signs, with global events the main source of concern. AAP

Promise on the horizon for Australian economy

The Australian economy appears to be benefiting from the current expansionary stance in monetary policy, despite uncertainties in the global economy. The CAMA Shadow Board is 71% confident that the cash…
Rising unemployment is likely to be a factor in future interest rate movements. Rising unemployment is likely to be a factor in future interest rate movements. AAP Image/Joe Castro

Spectre of rising unemployment to weigh on rates decision

The key question for interest rates this month is whether improving domestic demand will curb the increasing rate of unemployment and underemployment, or whether labour market weakness will persist. The…
Australia’s economic position remains uncertain, which may prompt the Reserve Bank to hold interest rates. Australia’s economic position remains uncertain, which may prompt the Reserve Bank to hold interest rates. AAP

Waiting game on economy means RBA should hold

Without a clear direction of where the Australian economy is heading, the consensus to keep the cash rate at its current level of 2.5% remains strong. Uncertainties surrounding the domestic and foreign…
Floating the Australian dollar helped us flourish - but was no panacea to all economic ills. Floating the Australian dollar helped us flourish - but was no panacea to all economic ills. Image sourced from www.shutterstock.com

The float Australia had to have?

The Australian dollar was floated this day in 1983. By 1985, it seemed to take on water, list badly, and sink. And that actually was the idea. The real exchange rate – roughly, the dollar rate, adjusted…
“It is surprising that the RBA is hosing down talk of a housing bubble when experience of the early 2000s suggests that the RBA can be wise to jawbone down the housing market.” “It is surprising that the RBA is hosing down talk of a housing bubble when experience of the early 2000s suggests that the RBA can be wise to jawbone down the housing market.” AAP/Lukas Koch

Interest rates: all eyes on the housing market

With uncertainty surrounding the recent federal election subsiding and positive economic news from abroad, several Shadow Board members worry that the Reserve Bank of Australia’s loose monetary stance…
Reserve bank governor Glenn Stevens said the bank today cut the cash rate to 2.5%, a record low. Reserve bank governor Glenn Stevens said the bank today cut the cash rate to 2.5%, a record low. AAP Image/Paul Miller

Central bank cuts rates to record low 2.5%: the experts respond

The Reserve Bank of Australia today lowered the cash rate by 25 basis points to a record low of 2.5%, saying that while inflation had been on target, the domestic economy had been growing below trend…
Buying power doesn’t always stack up as the best measurement for who we are and how far we’ve come. Buying power doesn’t always stack up as the best measurement for who we are and how far we’ve come. Shutterstock/ MaleWitch

More pie in the sky - economic progress no slice of life

In the verbal volley between Gillard and Abbott, Swan and Hockey, there is a conversation that we are not hearing. It bubbles below the consciousness of mainstream Australia, a conversation that is old…
Down? Stay as it is? Commentators are divided about the direction of the cash rate. Down? Stay as it is? Commentators are divided about the direction of the cash rate. Image sourced from www.shutterstock.com

Stay the course with interest rates: shadow board

The Reserve Bank of Australia should leave interest rates unchanged this month according to the consensus of Shadow Reserve Board members. Amid market uncertainty over whether the RBA board may choose…
Despite continuing unrest in Europe - particularly Cyprus - the global economy has firmed, say Shadow Reserve Bank commentators. Despite continuing unrest in Europe - particularly Cyprus - the global economy has firmed, say Shadow Reserve Bank commentators.

RBA: rates should hold, with a gradual return to neutral

The consensus of the nine members of the Shadow Board is that the Reserve Bank of Australia should leave interest rates unchanged from March at 3.00%. But the balance of risks implies rates should rise…
A number of Shadow Bank commentators point to a slight uplift in the housing market as a sign that interest rates should rise in the medium term. A number of Shadow Bank commentators point to a slight uplift in the housing market as a sign that interest rates should rise in the medium term.

Interest rates should stay on hold, for now

No change remains the consensus of the nine members of the Shadow Board in the Reserve Bank of Australia holding interest rates unchanged from February at 3.00%. But rates need to rise significantly within…
RBS joins the list of banks implicated in the ever-widening LIBOR scandal. RBS joins the list of banks implicated in the ever-widening LIBOR scandal. Flickr\ell brown

In the Tour de Finance, who will be the Lance Armstrong of the financial markets?

In his recent interview with Oprah Winfrey, Lance Armstrong belatedly admitted to taking illicit drugs throughout his career. But in doing so, he also shed light on a corrupt culture within the sport involving…
A blunt instrument: the case for interest rates to rise is strengthened by rising unemployment and a persistently high Australian dollar which has defied previous cuts. A blunt instrument: the case for interest rates to rise is strengthened by rising unemployment and a persistently high Australian dollar which has defied previous cuts. AAP

Rate cut unlikely, but the forward path for interest rates will be up

The Shadow Reserve Board, an initiative of the Centre for Applied Macroeconomic Analysis (CAMA) made up of eminent industry and academic economists, returns this month. Reserve Bank of Australia board…
The US Federal Reserve has made explicit the economic targets it wants to reach through its monetary policy. The US Federal Reserve has made explicit the economic targets it wants to reach through its monetary policy. AAP

US Fed stimulus names its targets in new policy direction

The announcement by the US Federal Reserve Bank that it would link its monetary policy to the achievement of specific economic targets beyond inflation is a new development in its approach to policy. In…
The CAMA Shadow Board believes the Reserve Bank of Australia should leave the cash rate unaltered. The CAMA Shadow Board believes the Reserve Bank of Australia should leave the cash rate unaltered. AAP

Interest rates should stay put

The Reserve Bank of Australia should leave the cash rate unchanged tomorrow, with little evidence suggesting an interest rate cut is justified, according to members of the CAMA Shadow Board. The Shadow…
Warning signals about global slowing have been there for some time - yesterday’s cash rate cut should not have been a surprise. Warning signals about global slowing have been there for some time - yesterday’s cash rate cut should not have been a surprise.

RBA’s rate cut was a matter of ‘when’ not ‘if’ - and there’s no need to panic

Monetary policy must be forward looking. It has limited ability to affect the here and now of the economy, as this has largely already been determined - by employment decisions, investment decisions and…
There are as many compelling reasons for the Reserve Bank to cut interest rates as there are to leave them unchanged. There are as many compelling reasons for the Reserve Bank to cut interest rates as there are to leave them unchanged. AAP

RBA should hold steady on interest rates — but when should it cut?

Predicting the Reserve Bank’s interest rate decision for October appears to be particularly tough for economic commentators. A decline in iron ore prices, compounded with a stubbornly high dollar, has…
The Reserve Bank of Australia is expected to keep the cash rates unchanged tomorrow: but prominent economists say the case for a cut may be firming. The Reserve Bank of Australia is expected to keep the cash rates unchanged tomorrow: but prominent economists say the case for a cut may be firming. AAP

Hold ‘em: but case for interest rate cut strengthens

CAMA’s Shadow Board, which gives its views ahead of the decision by the Reserve Bank of Australia, continues to support the current setting of the cash rate at 3.5%. But economists are seeing a greater…
The reserve bank should hold the cash rate steady tomorrow – but CAMA’s Shadow board members see greater uncertainty long term. The reserve bank should hold the cash rate steady tomorrow – but CAMA’s Shadow board members see greater uncertainty long term. AAP

RBA should hold rates, but longer term uncertain

The Conversation, in conjunction with the Centre for Applied Macroeconomic Analysis (CAMA), presents the monthly findings of the Shadow Board, prior to the meeting of the Reserve Bank of Australia Board…
Barclays - Britain’s largest investment bank - has been fined after it was revealed that the bank had manipulated the London Interbank Offered Rate to boost its trade of credit derivatives and bolster its financial reputation. Barclays - Britain’s largest investment bank - has been fined after it was revealed that the bank had manipulated the London Interbank Offered Rate to boost its trade of credit derivatives and bolster its financial reputation. AAP

Barclays' rate-rigging scandal exposes the rot in UK banking system

The sense of frustration and despair within the British government and regulatory agencies over the behaviour of Barclays in submitting patently false returns to the London Interbank Offered Rate (LIBOR…
The Reserve Bank of Australia should keep interest rates on hold, say a group of influential economists. The Reserve Bank of Australia should keep interest rates on hold, say a group of influential economists. AAP

Keep rates on hold, says CAMA shadow board

The Conversation, in conjunction with the Centre for Applied Macroeconomic Analysis (CAMA), will present the monthly findings of the Shadow Board, a day before the Reserve Bank of Australia Board meets…
What’s the true picture of Chinese economic stimulus? China’s decision to cut interest rates actually has modest implications for Australia. What’s the true picture of Chinese economic stimulus? China’s decision to cut interest rates actually has modest implications for Australia. AAP

China’s economy: thinking beyond the short run

Last week’s decision by China to cut interest rates by 0.25% seemed to attract almost as much attention in Australia as the same decision by the Reserve Bank of Australia (RBA) several days earlier. The…
Pay it down - Treasurer Wayne Swan goes through his now-usual exhortation to banks to pass on today’s Reserve Bank 25 basis point rate cut in full. Pay it down - Treasurer Wayne Swan goes through his now-usual exhortation to banks to pass on today’s Reserve Bank 25 basis point rate cut in full. AAP

Reserve Bank cuts rate to 3.5% - experts respond

Amid the tumultuous economic climate in the US and Europe - not to mention the tumbling fortunes of our sharemarket - the Reserve Bank of Australia has followed market sentiment and cut the official cash…
Given the RBA’s decision to slash the cash rate by 50 basis points, it’s hard to justify Treasurer Wayne Swan’s pursuit of a budget surplus. Given the RBA’s decision to slash the cash rate by 50 basis points, it’s hard to justify Treasurer Wayne Swan’s pursuit of a budget surplus. AAP

Cutting rates, then tightening fiscal policy? Trying to make sense of the quest for a surplus

The former Governor of the Reserve Bank, Bernie Fraser, hit the nail on the head the other night when he found it absurd that the Reserve Bank could be reducing interest rates one day, while a week later…
Will the banks follow the lead of the RBA and cut interest rates? Will the banks follow the lead of the RBA and cut interest rates? AAP

RBA cuts the cash rate - will the banks follow?

The pressure is on Australia’s major banks to pass on the Reserve Bank of Australia’s 50 basis point cut in full to Australian households and businesses. In a surprise move, the RBA slashed Australia’s…
RBA governor Glenn Stevens will no doubt be portrayed in a flattering light if the board cuts rates today: but not everyone is a winner. RBA governor Glenn Stevens will no doubt be portrayed in a flattering light if the board cuts rates today: but not everyone is a winner. AAP

Not everyone wins when interest rates fall

UPDATE: The Reserve Bank of Australia has cut Australia’s official cash rate by a larger-than-expected 50 basis points, to 3.75%. In the likely event that the Reserve Bank Board chooses to ease the target…
Publishing long-term interest rate projections can allow the Reserve Bank to operate with greater transparency. Publishing long-term interest rate projections can allow the Reserve Bank to operate with greater transparency. AAP

A route to greater transparency and independence for the RBA

Today, all eyes will be on the Reserve Bank amid speculation that the cash rate will be eased by at least 25 basis points. The RBA has often faced pressure from politicians and business leaders to reduce…
Moves by ANZ last week to hike their interest rates was criticised by Treasurer Wayne Swan: but historically, banks have often been at odds with governments. Moves by ANZ last week to hike their interest rates was criticised by Treasurer Wayne Swan: but historically, banks have often been at odds with governments. AAP

Never mind the miners: here’s the bankers

In Australia’s economic history, there always been tension between Labor and the banks. My grandfather was an adviser to wartime Labor Treasurer and Prime Minister, Joseph Benedict Chifley, better known…
AWU chief Paul Howes' call for the Reserve Bank to tackle more than inflation should serve as an ongoing debate about macroeconomic policy. AWU chief Paul Howes' call for the Reserve Bank to tackle more than inflation should serve as an ongoing debate about macroeconomic policy. AAP

Call to change Reserve Bank charter raises important questions about macroeconomic policy

The head of the Australian Workers Union chief Paul Howes has called on the Federal government to urgently review the Charter of the Reserve Bank of Australia, suggesting its current policy setting is…
Contrary to a report published by French bank Societe Generale, Reserve Bank Governor Glenn Stevens confirmed that funding costs for Australian banks had increased. Contrary to a report published by French bank Societe Generale, Reserve Bank Governor Glenn Stevens confirmed that funding costs for Australian banks had increased. AAP

Evidence shows banks' funding stance on interest rates was correct

Predicting the setting for the banks' standard variable housing loan interest rate used to be simple. Before the subprime crisis in the US and the subsequent GFC, the variable rate was simply the RBA target…
Reserve Bank of Australia Governor Glenn Stevens: knowing how individuals board members think is important. Reserve Bank of Australia Governor Glenn Stevens: knowing how individuals board members think is important. AAP

Shadowing the RBA: uncertainty matters when it comes to interest rates

Monetary policymaking is imperfect. When board members of a central bank such as the Reserve Bank of Australia sit down to set the appropriate target cash rate each month - as they did this week - there…
Decoupled: The Reserve Bank of Australia’s decision to hold interest rates has been ignored by the banks. Decoupled: The Reserve Bank of Australia’s decision to hold interest rates has been ignored by the banks. AAP

Rates of wrath: understanding the Big Four’s actions on interest rates

Last week, the Reserve Bank defied market expectations to announce the 4.25% cash rate would remain unchanged. But the surprise decision by Australia’s Big Four banks to act independently of the Reserve…
Three of Australia’s Big Four banks have opted to offshore part of their financial operations to Asia. Three of Australia’s Big Four banks have opted to offshore part of their financial operations to Asia. AAP

More offshoring of Australian jobs? Can you bank on it?

Reports of more offshoring of jobs from Australia to other countries are, seemingly, a daily occurrence. Such reports include, for example, the manufacturing of cars and their components and aspects of…
ANZ and NAB have cut their mortgage rates. Will the other two major banks follow suit? ANZ and NAB have cut their mortgage rates. Will the other two major banks follow suit? AAP

Are banks gouging by not passing on interest rate cut?

ANZ and National Australia Bank have passed on the Reserve Bank of Australia’s 0.25% interest rate cut to mortgage holders, lowering their standard variable rates. Treasurer Wayne Swan called on the big…
Banks increasingly choose not to follow the lead of Reserve Bank of Australia Governor Glenn Stevens on interest rates. Banks increasingly choose not to follow the lead of Reserve Bank of Australia Governor Glenn Stevens on interest rates. AAP

Should banks be compelled to pass on interest rate cuts?

As Reserve Bank of Australia board members gather today to ponder Australia’s cash rate, financial markets are having a bet each way the RBA will cut rates amid the release of data reflecting a softening…
Can we expect more interest rate cuts this year? Can we expect more interest rate cuts this year?

Interest rate cut: experts respond

The Reserve Bank of Australia has cut the official cash interest rate by 25 basis points, from 4.75% to 4.5%, in a move matching most economists' expectations. It was the first cut since April 2009. Westpac…
Glenn Stevens has acknowledged the impact of deleveraging on Australia’s economy. Glenn Stevens has acknowledged the impact of deleveraging on Australia’s economy. AAP

On High Noon Tuesday at the RBA Corral, can we expect a rate rise?

I have a hunch that the RBA will follow its conventional “neoclassical” models and raise rates this afternoon, even though the economy is locked in “two speed” mode, and the global economy is racked by…

Research and News (2)