Every time I hear the thoughts of Chairman Yellen, as it was with Ben Bernanke, I cringe at the horrors they have visited on the world. But then there’s our own RBA Governor, an entirely different story:
THE Reserve Bank has an open mind on reducing the cash rate further but monetary policy can’t force people to spend money, a parliamentary committee has heard.
‘Monetary policy can’t force spending to occur,’ RBA governor Glenn Stevens told a parliamentary committee.
As if spending money is what drives an economy. But it’s even better than that. Listen again:
‘In the end, though, firms and individuals have to have the confidence to take advantage of that situation.
‘They have to be willing to take a risk – on a new project, a new product, a new market, a new worker.’
What you have seen here is something you almost never see and it was as natural as sunlight. In the first passage, Glenn Stevents is referring to the spending of money. In the second, he is discussing the employment of real assets. It is, of course, the second that matters if we are talking about making the economy grow. And for that, the RBA is almost impotent. It is creating an environment in which businesses feel confident enough to commence new projects and expand existing ones. Nothing will happen overnight. But at least the RBA is not about to drop rates in a panic and is willing to wait on events.