Here are some excerpts from Stephen Koukoulas's attack on the RBA in the AFR today:
In the past year, the Reserve Bank of Australia has made an error by placing too much weight on the mining boom and the overheating in that sector. At the same time, it has underplayed the weakness in the rest of the economy...Interest rates have remained higher than would have been the case had the RBA given more weight to the negative influences and scaled back its magnified optimism on mining...The reluctance of the RBA to cut interest rates further is surprising given the spectacular back-tracking on its gross domestic product forecasts in 2011...The RBA’s forecasting error extended to underlying inflation...By not cutting rates this year, the RBA has undermined confidence, restricted credit growth, and locked in an unnecessarily long period of economic underperformance...The RBA can address this easily by lowering official interest rates to ensure the economy does not have to deal with another year of sub-trend growth. An interest rate cut in April would be a good move.
