Extraordinary comments from a current RBA director, Don McGauchie, today, as reported in that outstanding journal, The Australian:
"He said Reserve Bank governor Glenn Stevens had "tried to explain that there are real issues around the flexibility in the economy that is being wound back". "We are subsidising industries we shouldn't be subsidising, we are spending money on fiscal stimulus and other things we shouldn't be spending money on and that means higher interest rates than we would otherwise have," Mr McGauchie told The Australian. "He hasn't said it as bluntly as I have, but that's what's happening.
"There's a risk it could get worse because we're now back into a very substantial terms of trade shock, which will aid inflation. If that's being added to by fiscal policy, then monetary policy has to be tougher."
Mr McGauchie, a critic of Labor's decision to build the NBN, said monetary and fiscal policy worked together in the Hawke-Keating Labor government and the Howard Coalition government. "We've now got a situation where they are working against each other because it's being mismanaged at a fiscal policy level," he said."
