The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Tuesday, August 16, 2011

What happens when you miss your inflation target, repeatedly, like the RBA has?

Well, it's sort of easy. You go back to a world without a credible inflation target. Just focus on the pre-1990 part of this RBA chart.

It's funny. Australia's inflation-targeting "miss"--of about 0.50 percentage points per annum--over the last decade (given the difference between the RBA's core measure of inflation since end 2001, which has averaged 3.0% pa, and the RBA's implied 2.5% pa target) is kinda similar to Australia "miss" in labour productivity performance comparing the 2000s to the 1990s (admittedly in absolute percentage point terms).

It's okay to talk about low productivity. Shame on you, however, if you dare raise the question of the Australia's poor inflation performance.