Reserve Bank governor Philip Lowe must have been trembling in his dressing gown this morning as he breakfasted over the Financial Review. Days after the brains trust at the Fin purred in agreement with what they thought was the bank’s intent to match other central banks and raise interest rates, they discovered they were wrong.
As Crikey noted yesterday, the recent speeches from both Lowe and his offsider Guy Debelle have firmly quashed the hopes of inflation hawks that the RBA would arbitrarily decide to join other central banks in raising interest rates, even if the rates in other countries are even lower than our own, and even if inflation is again falling back, both here and overseas. This has left some commentators who cheered what they thought was a rousing determination to inflict pain on the economy high and dry — especially the Fin, which editorialised at the time that it was “time for rate reality”.
Fair to say, this has elicited a change in tone from the national tabloid, which today editorialised in disapproving terms of the “risks in the RBA game plan.”
“Markets* got excited last week when the Reserve Bank’s board minute discussion of the new neutral cash rate appeared to signal an imminent start to the normalisation process. But Dr Lowe argued this week that, because the Reserve Bank did not shimmy interest rates down to the near zero level of other central banks, it can wait for the others to move away from this extreme… This is reasonable under the old macro rules. But the Financial Review worries that such a long period of ultra-cheap money is now seriously misallocating capital and injecting risk into the economy while doing little to boost national and household income.”
The editorial then goes on to cite Business Council chief clown Grant King and say that what’s needed for growth isn’t low interest rates but changes to our “uncompetitive and incentive blunting tax system, our unproductive workplace regulation”.
So this is what the Fin seriously thinks — we’ll get more economic growth by punitive interest rate hikes, slashing wages and handing multinationals a huge tax cut when they already pay far below the current tax rate. This isn’t even hardline neoliberalism — it’s hardline stupidity. Maybe Lowe was trembling — at the rotten state of economic discourse in the media.
* actually, the Fin editors, but we digress
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