ANALYSIS: Labor’s past traumas are haunting them —as the RBA wields the sledgehammer
It turns out that not only can politicians survive such turnarounds, but they can actually prosper. Policy dexterity is applauded and rewarded by voters who are prepared to be convinced that policy should be able to change with the times.
From a time when it said literally nothing public about what it was doing, the RBA — mostly through its governors — became a regular contributor to the public debate. This sometimes meant central banks didn't have to act to move interest rates as they might otherwise.In Australia, given the very long periods since 1990 when monetary policy has carried a disproportionate load in setting economic conditions — because of political obsessions with "debt and deficits" or equally political caution with using tax and spending policies to affect economic activity — the Reserve Bank has been centre stage, often when it should not have had to be there.
Unfortunately, the public utterances of current Reserve Bank governor Philip Lowe, in trying to boost confidence during COVID by saying interest rates were not going to rise for a couple of years, has caused all sorts of grief to individuals, and for that matter, to Lowe's credibility. Central amongst the questions should be why he felt he had to apply a sledgehammer to expectations when the RBA's own statement of monetary policy on Friday noted repeatedly that inflation seems to be peaking around the world and that inflationary expectations, and wages, are not ratcheting up spectacularly.
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