He’s trying to tell you something but with economics in the low state it is in, hardly a soul is even capable of understanding his point. And what he is saying is that lowering interest rates is not only not an answer to our economic problems, but will, in fact, likely make them worse.
Reserve Bank governor Glenn Stevens remains open to lowering interest rates further as the outlook for economic growth remains soft, but warned that the benefits of doing so may be limited and that it could even be risky.
“We remain open to the possibility of further policy easing, if that is, on balance, beneficial for sustainable growth,” he told a meeting of economists in Brisbane.
Mr Stevens said the areas of the economy that low interest rates could support were already performing solidly, adding that more stimulus had to come from government and business to lift economic growth.
Governments should commit to a sustained increase in infrastructure spending, even if they had to borrow to do so, he said.
“The bigger point is that monetary policy alone can’t deliver everything we need and expecting too much from it can lead, in time, to much bigger problems,” Mr Stevens said.
On the other hand, borrowing for the kinds of infrastructure governments typically choose may also not be much of an idea either.