You can always count on Rory for some levity...And he's right (as I have also argued here before): the RBA should be getting a pat on the back for bringing core inflation down to 2.2%, which by any other developed world central bank's standards is not too low. Does a 2% per annum tax on your purchasing power sound too low to you? I do worry about the outlook though. And I think Rory knows that the RBA is probably a little more anxious about its inflation-targeting track-record than his otherwise gushing text belies:
Alan Stokes’ “Just don’t bank on an apology” (May 5-6) reckons that the Reserve Bank of Australia governor Glenn Stevens should issue a mea culpa for keeping interest rates “way too high for far too long”. That’s a lively opinion, one shared by a variety of commentators. Awkwardly, there are no good facts to back it up. After all, the RBA’s legislated objective boils down to targeting low unemployment alongside 2 to 3 per cent inflation. And with unemployment stable near 5.2 per cent over the past six to nine months, annual private wages growth at 3.8 per cent and core inflation at 2.2 per cent, the overall economy is pretty close to exactly where it should be. Stevens has only one interest rate tool at his disposal, so the RBA is not in a position to hit his macro targets while at the same time micro-managing policy for the benefit of everyone’s pet parts of the economy. On any reasonable analysis, the RBA gets pretty good marks over Stevens’ tenure, and indeed over recent decades. If Stokes is keen to nominate underperformers that should be issuing mea culpas, I can suggest a couple of seriously deserving high-profile targets for his ire.
