The Herald Sun asked for my views. I said, But you have the Shadow Governor!? I could have also mentioned a near-fully employed labour market, and annualised core inflation sitting at 2.6%. But this is what they printed:
I DON'T think there is any need for the Reserve Bank to reduce rates after the November and December cuts. All the concerns the RBA cited in rationalising the December cut have dissipated materially since that meeting. Changes in interest rates take about one to two years to have their full effect, and the RBA has time on its side to observe exactly how the economy is travelling. Most Australian and global economic data has surprised on the positive side since the RBA's last board meeting, and conditions in Europe appear to be stabilising. Finally, measures of financial stress in Australia are way below their December levels. However, what I think the RBA should do, and what it will do are two quite different things. The financial markets expect it to cut, and the vast majority of economists are forecasting that it will do so, too. These expectations can influence the RBA, which tends not to like to surprise the markets. So I would say that it is a line-ball call as to whether it does or doesn't relax rates. But I don't think it should!
