But the RBA should ignore this positive noise--it should cut rates, or so the argument goes. Productivity is low. Wages are growing robustly. Core inflation is about 40% above the RBA's target (assuming they still have one, which is a genuine open question). Unemployment is at its full-employment level of around 5%. We have the biggest private investment boom in history. The labour market is more rigid than it has been in a long time. Our key trading partners, China and India, are growing quickly and have inflation problems. The rest of the developed world is keeping interest rates near zero for as long as the eye can see.
But ignore all that, and slash rates by 100bps. After all, you should be maximising growth and employment. House prices are down a bit, the equities market is still off 30% from its 2007 highs (and all those fund managers are very vocal), and retailers/manufacturers are having a tough time. C'mon guys, you have a multi-faceted mandate! Check the 1959 Act, and ignore the 2010 Statement on the Conduct of Monetary Policy. Better yet, confuse us all and cherry-pick parts of both to maximise your wriggle room. I guess that is why you like to call it "flexible inflation-targeting". We target low inflation when...inflation is low. But when core inflation prints high, we find reasons in our mandate to look through it. Maybe it should be called "inflation-targeting, when we want to".
