The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Tuesday, September 28, 2010

Dr Stephen Kirchner slams the RBA for mandate-creep

The CIS's Dr Stephen Kirchner, who has been a thoughtful critic of the RBA expanding its traditional inflation-targeting mandate (as discussed here many times over the years), has today slammed the central bank in a post on his blog.

For some reason the mainstream media, which tends to be highly compliant as far as the RBA's governance is concerned, has mostly ignored these issues notwithstanding their centrality to the conduct of monetary policy. The late Morgan Mellish was the last Australian journalist to seriously tackle this subject. Most avoid it like the plague since they think they rely critically on the RBA for their intelligence. In my experience, however, the RBA is happy to engage with all counterparties irrespective of their views on the merits of its decision-making processes. In any event, I will leave you with the always-irascible Kirchner:

"The RBA can’t have it both ways. To complain about ‘overheating’ in 2002-2004 and then ‘serious supply-side constraints’ in 2009 suggests that the RBA’s jaw-boning efforts may well have been pro-cyclical...

Milton Friedman showed the disastrous consequences of a central bank becoming an ‘arbiter of security speculation and value’. The RBA’s review of its own record suggests that it is no better at calling future developments in the housing market than anyone else. Statements such as ‘the very prominent role of investors in the housing market also suggested a strong speculative element’ (p. 24 of the RDP) belong in the mouths of politicians and taxi drivers and not central bankers."