Peter Martin, Crawford School of Public Policy, Australian National University
The Reserve Bank cut interest rates on Tuesday because we weren’t spending or pushing up prices at the rate it wanted. On Wednesday we might find things are worse than it thought.
The prudential regulator has a history of doing too much, too late.
Inflation has barely been within the Governor Philip Lowe’s target band his entire time in office. Zero inflation means he should cut now, before the election.
Philip Lowe tells the Press Club on Wednesday there’s now an even-money chance rates will be cut.
Dan Himbrechts/AAP
As with economic growth and wages, the RBA’s response seems to involve crossing as many fingers and toes as possible and publicly proclaiming that things are looking good.
The air may fizzle out of the Australian balloon, or it may burst violently.
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Two experts argue for and against government intervention when it comes to fixing low wage growth.
The RBA argues that it needs to balance financial stability risks against the need to stimulate the economy through lower interest rates. But this has left inflation running below its target range.
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If the RBA continues to sacrifice its inflation target on the altar of financial stability risks, inflation expectations and our wages growth will continue to languish.
While the RBA might not be able to influence the current cash rate, it can still influence longer-term rates by offering guidance about its future policy decisions.