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."

Thursday, September 1, 2011

RBA Stevens: Wages growth will have to slow if productivity stays low

Mr CIOBO: In terms of the RBA's tolerance level for wage growth, historically it is a combination of productivity growth plus inflation. With a trimming of productivity growth does that mean that what is effectively NAIRU is higher?

Mr Stevens: I think what it means, if the hypothesis is that productivity growth is permanently lower, is that then the rate of nominal wage growth that everybody has been accustomed to will not be consistent with the inflation target any more unless some other factor is at work providing an offset. That factor could be a rise in currency but it would have to keep rising not just rise once [CJ: I have previously explained that the currency cannot substitute for rate hikes unless it consistently increases]. It is quite an important question. I would not pin this just on labour productivity, multifactor productivity generally has slowed down.