Australia may have the world’s most incompetent central bank

Cannot be sure since I don’t watch them all, but it’s gotta be a contender. Look at this from today’s AFR: RBA’s Lowe flags ‘extended period’ of low rates.

Speaking at the annual Australian Business Economists Anika Foundation lunch in Sydney, Dr Lowe also said the RBA board “is prepared to provide additional support by easing monetary policy” if growth in economic demand “is not sufficient” to lift inflation “in a reasonable timeframe”….

“It is highly unlikely that we will be contemplating higher interest rates until we are confident that inflation will return to around the midpoint of the target range,” Dr Lowe said.

So they don’t know that artificially low interest rates slow economic growth. They’re not alone, but it would be nice if they were at least aware this is potentially a genuine consequence of keeping rates too low. But that isn’t even the issue. Their problem is that the inflation rate is too low!

This is unreal. They are trying to get the level of money demand to rise to create more inflation. Go on, explain your reasoning, if you can. Real demand will never rise since real supply, the basis of demand, will never rise with such policies in place. Do these people know anything?

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47 Responses to Australia may have the world’s most incompetent central bank

  1. mh

    They want to lift asset prices. Nothing else.

  2. John A

    Does the Doctor purposely intend that the RBA acts to increase the rate of inflation?

    He’s mad, you know. Genuinely barmy.

  3. mareeS

    A a couple of older goats in the anaconda, we sensibly monitor our spending to keep our good life.

    Our kids have a good take on this, live within your means etc, occasionally tap the bank of Mum and Dad, but present young somethings seem to think everything out here is theirs for the taking.

  4. Confused Old Misfit

    The Last Refuge

    MAGAnomics – Durable Goods Orders Increase in Advance of Q2 GDP Release…
    Posted on July 25, 2019 by sundance
    The second quarter Gross Domestic Product growth result will be released tomorrow. The Q2 GDP growth rate is historically the worst quarter of the year. A growth rate higher than 1.5 percent will be a strong indicator the U.S. economy remains on track for a cumulative year of around three percent.

    In the latest economic releases the orders for durable goods “unexpectedly” jumped in June [2 percent], again indicating the overall strength of the U.S. economy and strong consumer purchasing. Additionally the trade in goods deficit “unexpectedly” declined 1.2 percent in June as more manufacturers “surprisingly” shift production back to the U.S, and domestic consumers are “unexpectedly” loyal to USA.
    Every economic indicator is positive, and each series of released data shows the U.S. economy is increasingly strong.

    MAGAnomics won’t work in the southern hemisphere. If you tried that here the reverse would happen. You know, like how the coriolis effect moves the effluent down the gurgler and through the “S” bend?

    Angels and Ministers of Grace Defend Us!

  5. Iampeter

    Australia may have the world’s most incompetent central bank

    A central bank by definition is incompetence, but the Australian one is the only one still not at 0% or negative interest rates, so technically it’s the least incompetent.

    So they don’t know that artificially low interest rates slow economic growth.

    Yea, but you support tariffs, so this is just another stone you’re throwing in that glass house you like living in.

  6. Dave Brewer

    They’re bureaucrats, so what do you expect? They were given a task many years ago, which was to throttle inflation. Unfortunately it was understood as a target rate of CPI, which left out asset prices.

    Result, as with all targets handed to bureaucrats: the target is met but by buggering everything else up in the process.

    They’re not there to think, they’re there to do what they’re told.

    But it’s OK, we have a democracy and free speech, so eventually the new problem created by the old solution will be recognised. This should only take a decade or two of lost growth and opportunities. Then a solution will be found…and bureaucrats will be asked to implement it.

  7. Frank Walker from National Tiles

    The best thing the RBA can do is to mimic a free market quasi central bank that would issue currency and act as a clearinghouse.

    That would mean a long term inflation target of zero with flexibility in the short term, and not favouring inflation or deflation either way. I would also link currency issue to asset backing accumulation.

  8. Bruce of Newcastle

    Monetary policy can be harmful, but it rarely is helpful. Except maybe as a signal. But if you want to signal you’d be better off waving a flag at these levels. Tiny moves in interest rate are meaningless pushing on the string.

    The worst thing about monetary policy is that politicians use it as an excuse. They can pass the buck to the RB who will “stimulate the economy”. It does nothing of a sort because the actual interest rates that small business pay are massively higher than the Reserve rate. That’s because they reflect the risk to the bank. In turn lending to business is risky because the business landscape is a jungle/swamp full of alligators.

    Since the GFC the amount of regulatory crap that has rained down on businesses, paperwork, taxes, green regulatory insanity, diversity/woke/antidiscrimination and whatever, it is no wonder that SMEs can’t make business plans work. They’re drowning. Giving a 0.25% interest rate cut to a drowning man is utter futility.

  9. mem

    I like to be informed about the people that make such decisions. The RBA may be an entity, but people make the decisions. From t its website I am reliably informed that it now has equal numbers of male and female. Personally that’s not what is important to me. But I do read that one of the 9 members was Chairman of the Climate Change Authority which suggests immediately to me that she/he doesn’t have one ounce of critical thinking in his/hers/its brain cells. I could go on with a dissection of the others but what I would say is that they are with the exception of maybe one, all professional board members and toadies to pc. All well paid and not relying on interest rates to produce returns or build up capital for investment. https://www.rba.gov.au/about-rba/boards/rba-board.html

  10. Dr Fred Lenin

    So who is surprised ? another incompetent branch of the Canberra Swamp , the place must be stiff with them . International Swampies all have incompetence in common . Do they teach it at Australias 467 “youniversidies “ .

  11. Tel

    https://tradingeconomics.com/united-states/interest-rate

    Dopey fake Randian … can’t even check the Fed rate chart.

  12. Roger

    “Australia is a lucky country run mainly by second rate people who share its luck. It lives on other people’s ideas, and, although its ordinary people are adaptable, most of its leaders (in all fields) so lack curiosity about the events that surround them that they are often taken by surprise.”

    Donald Horne, in 1964.

    Never loses its relevance as our politicians and senior bureaucrats keep living up to it.

  13. Jonesy

    Low wages and a glut of skilled migrants, desparate enough to accept low wages(…because the rate is ten times higher than the home country, to which they will return to like royalty) will keep inflation in a hole more effectively than the RBA. Ten years ago, as the boomers started to retire from blue collar jobs like interstate transport, wages started to increase to try and attract new employees. That all stopped when the big two started importing people from the sub continent . Now, we have poorly trained, inexperienced drivers in charge of 65tonnes of heavy vehicle…yes, Charlotte, you’re sharing the road with incompetents. But that should not be a worry because, even with high wages, less people want to expose themselves to such levels of danger and boredom to complete such a menial task as driving a truck..the love of the grame is gone.

    Having said that, why is it that, in the likes of Germany and other high tech countries around the planet…a job is for life. Whilst here, we embrace multiple careers in diverse jobs not even invented yet. No job need last more than five years before a seachange must be required. This leads to a nation of unskilled unqualified serfs. Why spend 12 years in school, another 4 years at uni then another two to five years actually learning the job if its only going to last five years? Jobs for life mean high skilled high valued employees that cost the company a bomb to replace…normally well remunerated too. We are heading down the wrong path…this way leads to poverty!

  14. Squirrel

    The RBA is just making stuff up in order to avoid the popping of the gigantic debt-funded asset price bubble which they did nothing of consequence to avoid (and much of consquence to inflate).

    The Australian banking system rests on that bubble, as do the financial futures of a large number of Australians, particularly those who have been prodded to move their money out of low-earning bank accounts and into riskier investments.

    When the international debt tide eventually recedes, it’s going to be very, very ugly in Straya – particularly as so much of the monetary and fiscal ammunition has been squandered.

  15. Ƶĩppʯ (ȊꞪꞨV)

    Rates will not significantly rise in my life time. Why should they, we have an slow motion demographic decline unfolding. The Replacements are not what they are cracked up to be.

  16. Elderly White Man From Skipton

    Frank works at the Vatican Bank.

  17. Dave Brewer

    I like to be informed about the people that make such decisions…. I do read that one of the 9 members was Chairman of the Climate Change Authority which suggests immediately to me that she/he doesn’t have one ounce of critical thinking in his/hers/its brain cells.

    Correct. And it gets worse. One of the others has been wasting his time and our money on generating climate change BS while a Board member. Not only that, but he’s the Deputy Governor, who usually moves up to the top job.

    As others have remarked, the Board is full of Swampies and Donald-Horne second-raters. It’s come down a long way even in the last 15 years. At least Macfarlane stuck to his job. He was also bright enough to work out the climate scam in his spare time, although he kept fairly quiet about this.

  18. Chris M

    …a glut of skilled migrants, desperate enough to accept low wages(…because the rate is ten times higher than the home country, to which they will return to like royalty

    Except it’s generally not ten times anymore. If you visit a few third world countries of late you’d be surprised how much more some are being paid and how prices have risen compared to the not-so-distant past.

    Which is another way of saying the Aussie dollar has gone to crap and we’ve lost a LOT of value.

  19. Frank Walker from National Tiles

    Elderly White Man From Skipton
    #3116202, posted on July 26, 2019 at 6:34 pm

    Frank works at the Vatican Bank.

    Oh god he’s a conspiracy loon.

    Oh my yes you’re right, I’m also related to GW Bush, the Queen and I’m 1/64th lizard.

    Fuck off and read more David Icke, you demented loser.

  20. Elderly White Man From Skipton

    Frank: I don’t think it’s a conspiracy at all. I think it’s a very badly managed organisation that covers up quite a lot of incidental criminal activity. It gets away with it because people like you defend its criminal behaviour with angry assertions and plain vitriol and threat. The sad thing is that you always blame the victims, notably the kids.

  21. Sunni Bakchat

    If the morons in the Reserve Bank had a broad education they’d know about Wicksell rather than just Keynes.
    Clearly Keynesian economics does not have the answer or it is being interpreted incorrectly.
    This idiocy from the Reserve Bank will continue until their hand is forced. For there is not an original thinker or courageous person to be found in the institution, or just about any other western reserve bank at present.
    For those seeking a little inspiration, William White, former chief economist at The Bank of International Settlements is all over the subject.

  22. Miltonf

    Doesn’t appear that Debelle and Lowe have ever worked in the private sector.

  23. Frank Walker from National Tiles

    Elderly White Man From Skipton
    #3116261, posted on July 26, 2019 at 7:47 pm

    Frank: I don’t think it’s a conspiracy at all. I think it’s a very badly managed organisation that covers up quite a lot of incidental criminal activity. It gets away with it because people like you defend its criminal behaviour with angry assertions and plain vitriol and threat. The sad thing is that you always blame the victims, notably the kids.

    First of all you vicious loon, you are derailing the thread with your unsubstantiated, deranged bullshit.

    Second of all you creepy weirdo, you are using other people’s kids to defend PROVEN false accusers.

  24. Maryanne

    Decades ago I read that a formal education in economics is a “cretinizing process”. Economists certainly can’t see the wood for the trees. They – and politicians – boast about GDP as if it’s a measure of prosperity. It’s not. Road smashes, accidents, burglaries and acrimonious divorces all boost GDP which is just a measure of economic activity.

  25. Frank Walker from National Tiles

    Maryanne
    #3116302, posted on July 26, 2019 at 9:20 pm

    Decades ago I read that a formal education in economics is a “cretinizing process”. Economists certainly can’t see the wood for the trees.

    Shut up, Maryanne.

    They – and politicians – boast about GDP as if it’s a measure of prosperity. It’s not.

    That’s precisely what it is, you rambling imbecile.

    Road smashes, accidents, burglaries and acrimonious divorces all boost GDP which is just a measure of economic activity.

    No, they don’t. Either you’re just plain dumb or you’re a smart troll educating others about The Fallacy of the Broken Window.

  26. mh

    Tel
    #3116161, posted on July 26, 2019 at 5:24 pm
    https://tradingeconomics.com/united-states/interest-rate

    Dopey fake Randian … can’t even check the Fed rate chart.

    Iampeter took his wrongology to new heights.

    Incredible performance.

  27. max

    Gary North:
    Let me present a syllogism. 1. Theft is immoral. 2. Inflation is theft. 3. Fractional reserve banking is inflationary. 4. Central banking is government-guaranteed fractional reserve banking. 5. Immorality leads to judgment.

    Central banking has been a moral hazard ever since Parliament gave a monopoly to the privately owned Bank of England in 1694. Central banking exists primarily to protect large fractional reserve commercial banks from bank runs, and therefore to preserve the fractional reserve banking system nationally. Of all modern institutions, none has been more committed to subsidizing moral hazards than central banking.
    Along the way, central banks preserve stock markets from sell-offs that might produce runs on commercial banks, or what is the same today, cascading cross-defaults when overextended banks cannot pay off each other at the end of the business day, which today is international.

    Gary North:
    The heart of the modern monetary system is fractional reserve banking. This system is based on fraud. At the very heart of the modern economy is fraud — fraud on a gigantic scale.
    What is the nature of this fraud? Counterfeiting. Banks are government-licensed institutions that issue bogus IOUs. Because these IOUs function as money, they are counterfeit money. This is the heart, mind, and soul of all modern banking.

    Gary North:
    Banking is a cartel in every nation. It is a closed industry. Governments limit the number of banks that can be created. This becomes highly profitable for banks. But they still are at risk in a banking panic. If one bank goes bankrupt, fear of more bankruptcies can spread. More depositors go to their banks and demand payment. So, the cartel of banks wants a way to secure the system from the depositors. They petition the government to create a central bank. This bank is a government-created monopoly. It has the legal authority to create money out of nothing. It can buy government bonds with this counterfeit money. It can make loans to banks that are suffering a bank run. In practice, it lends money to the largest banks.

  28. Iampeter

    https://tradingeconomics.com/united-states/interest-rate

    Dopey fake Randian … can’t even check the Fed rate chart.

    Catallaxy moron who has no idea what’s going on, thinks semantics that don’t change the point that was being made, need to be stated as if they change anything.
    It’s not clear what purpose of this is but being unclear and pointless is not a problem for Catallaxy morons.

  29. Tel

    The Fed is only the most significant central bank in the entire world … the most watched interest rate and every Fed statement is a news story. But hey … after they have been raising rates for two freaking years and the guy who constantly shitposts about his own brilliance, boldly claimed the Fed rates are still zero. Making this claim as a way to prove the RBA is doing OK while our rates are lower and our rates are steadily falling.

    That’s a contender for stupidest post ever made on this blog.

    There’s no recovery from here … that level of idiocy is unbeatable. Don’t expect to live this one down. You have beclowned thyself royally, and abandoned the slightest remaining vestigial credibility you might have been clinging to.

  30. Sunni Bakchat

    Why is it that nobody in Australia is speaking up about the deflation being caused by low interest rate policy? Why are the voices against the rising levels of debt so muted? The debt/deflationary bust that will inevitably result from the extreme low interest rate policy will be very damaging to the Australian economy. Worse still debt/deflationary busts are usually followed by periods of very high inflation.
    The Reserve Bank should be raising rates and engaging in some financial repression. The lack of this is making matters worse by the minute.
    Australia is in for some very very tough times.

  31. Jock

    Being an old and slightly bruised foreign exchange dealer my view is a that we are witnessing a race to the bottom by central banks looking to lower their currencies to make them more “competitive”. They don’t admit this of course. They argue slightly slower growth or that inflation is below their targets. Frankly it’s funny that a central bank wants higher inflation. But even funnier that they think their measures are accurate. The voters out there think the cost of living has increased too quickly on the other hand. Wonder who is right? Then there is growth. Has anyone else noticed a sharp slowdown that would initiate 2 quick reductions in rates? Did i miss it?

  32. Frank Walker from National Tiles

    Catallaxy moron who has no idea what’s going on, thinks semantics that don’t change the point that was being made, need to be stated as if they change anything.

    Shut up Putrid. Up isn’t down.

    A is A.

    A is A.

  33. mh

    According to Australia Debt Clock, the total of Australian household mortgage debt for housing (owner-occupied and investor) is over 2 TRILLION AUD.

    The RBA wants this mortgage debt HIGHER.

  34. max

    Sunni Bakchat:

    “deflation being caused by low interest rate”

To begin to deal with the inflation vs. deflation issue, we have to get our terminology straight.

    Let me define deflation: a decrease in the money supply.

    If the money supply is rising, it will be a time of inflation. If it’s falling, it will be a time of deflation.

    Don’t be deceived. Stick with the definition of inflation or deflation that tells you what central bank policy is. Don’t be swayed by changes in the price of anything. Watch the money supply. Follow the money.

    CONSUMER GOODS
    There is no deflation in computer prices. This is because computers are not money. So, there can be neither deflation nor inflation of computers. There are falling prices for computers. For ninety years, there have been steadily falling prices for computation. There is no “crisis in computation.” Companies come and go, but the consumer wins. Are we agreed?
    There is no deflation in energy. There is also no inflation. Energy is not money.

    Then where is this much-heralded deflation? In prices? They tell us that there is deflation in China. This is amazing, given the fact that the Chinese central bank admits to an increase in the money supply of 18% over the last year.
    Can prices fall when the money supply rises? Yes. Computer prices fall continuously, no matter what the Federal Reserve System does. Chip efficiency rises. Benefits to computers rise. Nobody is yelling in the streets, “Computational deflation is coming!” The sky is not falling.
    Can all prices fall when the money supply goes up? Who knows?

    The price of consumer goods is falling, we are told. I respond: Which consumer goods? And what if they are?

    What about China? Are prices falling in China? Not the price of real estate in Shanghai. Not the price of luxury condos anywhere else. Some prices may be falling, and probably are falling. Others are rising, such as the black market prices of goods whose production is still monopolized by the government. I suppose the price of justice is going through the roof. I mean bribes. No more Third World, Mao-era prices. New, capitalist prices!

    “Why are the voices against the rising levels of debt so muted?”

    As to debt, the public cares only about the monthly bills. People care nothing about how much they owe totally; only how much they owe next month.

    With interest rates down, especially mortgage debt, the public is refinancing or buying larger, more expensive homes. It doesn’t cost them more on the first of the month to finance their new lifestyle. They don’t care about their net worth; they care about paying next month’s bills. They care little about equity and less about their total debt. They might as well be Congressmen.

    “Worse still debt/deflationary busts are usually followed by periods of very high inflation.”



    well did not happen in Japan, yet

  35. nfw

    “Australia may have the world’s most incompetent central bank” May have?

  36. Elderly White Man From Skipton

    Hey Frank: is there is anything that does not incite your abuse? You seem to be a Catholic economist who spends his time defending serial child abusers and economists!
    Get a grip man.

  37. Frank Walker from National Tiles

    I have never “defended a serial child abuser”.

    You are a whacko anti-Catholic loon who keeps on derailing threads.

    All I have done is shown proven cases of false accusations, which are numerous and zealous.

    These accusations include perjury and the accused proving they were not in the country at the time of the alleged and fabricated story of abuse.

    As for perjury – see the committal hearing of Geroge Pell.

    As for making false claims against someone literally not in the same country at the time of the alleged, fabricated offence – see the lunatic false claims against Pell made by Vivian Waller prior as well as the acquittal of the priest from regional NSW.

  38. J.H.

    Frank Walker from National Tiles
    #3116230, posted on July 26, 2019 at 7:07 pm
    Elderly White Man From Skipton
    #3116202, posted on July 26, 2019 at 6:34 pm

    Oh my yes you’re right, I’m also related to GW Bush, the Queen and I’m 1/64th lizard.
    ____________________________________________________________________
    LOL…. The wag in me could help but notice that that would make you more lizard than Elizabeth Warren is Indian, Frank….;)

  39. Entropy

    Oh my yes you’re right, I’m also related to GW Bush, the Queen and I’m 1/64th lizard.

    Hybrid vigour.

  40. Elderly White Man From Skipton

    Frank: amusing that you talk about derailing. I have never debated your apparent detective work. I have stated the obvious in relation to the criminal conduct of a global organisation, evidence of which is plain to anyone with eyes. I would add that your responses – abuse – to anyone you disagree with is in itself a derailing that reflects your own ugly state of mind.

  41. Iampeter

    Shut up Putrid. Up isn’t down.

    A is A.

    No, that’s what I’m saying.
    Over and over, thread after thread…

    But you’re just another bug eyed, crazy person from the Cat so I’m not expecting it to register.

  42. J.H.

    EWMFS…. Pffft. Your hyperbole condemns you just as much dude.

    You called Frank a defender of pedophiles. A pretty vile slur when, in Pell’s case, he is criticizing what is clearly a very tenuous verdict decided upon by the weakest of testimony that had many flaws and conflicting circumstances.

    The “evidence” in that case was barely credible in my opinion and would never have met the “beyond reasonable doubt” test if I’d been on any jury hearing such “evidence”.

    You really shouldn’t play the pedophilia card when criticizing someone’s opinion…. not if you expect a civil response.

  43. Frank Walker from National Tiles

    I have stated the obvious in relation to the criminal conduct of a global organisation

    What a bigoted loon and conspiracy nutter.

  44. Elderly White Man From Skipton

    Cranky Frankie: should rename yourself Ad Hominem

  45. MH:

    According to Australia Debt Clock, the total of Australian household mortgage debt for housing (owner-occupied and investor) is over 2 TRILLION AUD.
    The RBA wants this mortgage debt HIGHER.

    Like dietitians and womens fashion designers, economists get together on a cruise or a gigantic party.
    When there are just 9 people standing, they decide what lunacy they are going to inflict on the general public,
    Then they whip out the cocaine and go ‘double or nothing.”
    Now you know how policy is arrived at at the RBA.

  46. Ian of Brisbane

    Well, there is a way to make the RBA worse, put Swanny in charge.

  47. Bad Samaritan

    The only reasonable economic / financial goal of any organization or individual etc should be deflation; both in consumables, and in durables. Fact is that it is, but generally speaking the average organization or person does not express it this way….

    Companies try to do everything cheaper; to present their products at a lower price. Most buyers also try to get everything cheaper. Govts should be aiming at bringing things in under budget.

    It’s got me beat why the RBA should be the only outfit consciously aiming at the opposite. Why is this?

    BTW: please do not start with the nonsense that deflation would stifle economic activity. Everyone knows that most electronics and non-food items are going to be cheaper next year, but who really hangs off buying them because of that? Anyone at all?

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