The RBA, politicised conmen with a gun to the head of the Australian economy

[HurleyHepsHird]

The RBA can only do so much when the US Federal Reserve created money like crazy during covid and both Trump and Biden had big spending bills.

I'd be interested in a step by step explanation of how QE in the US, is dictating price inflation in Australia?

As the dominant causative factor.

The whole point of the RBAs QT program and interest rate rises is to increase unemployment and thus depress wages. Interest rate rises were not sat on "for too long" despite increase in the price of oil and other commodities powering global inflation, they were sat on because the RBA was waiting for updated wage data.

That is what is behind the stoush between the BCA types shoveled into RBA roles and Labor.

It's a fight over monetary policy not actually matching inflationary conditions, something increased interest rates in Australia won't depress. Instead the RBA is being guided by the demands of big employers whose profit yields and price gouging are actually tied up with current inflationary pressures.

Basically, it's a very obvious, very risky and very open con. Something that has obliquely been admitted to by the likes of Chris Kent et al.

But nobody bothers to read their press releases and speeches.

 

[Seeds]

There are some absolute s**t talkers in this thread, you included.

Australia does not have the highest net external debt in the world. Not even close.

We sit outside the upper quartile for the OECD, somewhere between 12th and 10th depending on which years numbers you look at.

In terms of external debt per/capita and external debt as a % of GDP, Australia is even further down the list.

Honestly.

One, i said developed countries not world. And its percentage of net external debt that matters. Not levels. Australia is a small economy. And our percentage of net external debt is far too high compared with other developed economies. Like all economists i always talk in shares of economies. Not absolute values. And from a macro perspective gross external debt is largely irrelevant, not completely, but largely Irrelevant. Its net external debt that matters.

 

[Gralin]

5 rate rises in a row totally 2.25% and saying they're not done, this is going to get grim

 

[Number37]

5 rate rises in a row totally 2.25% and saying they're not done, this is going to get grim

3.75 they predicted by the end of the year.
There's only 2 more board meetings this year.

That's 0.75 each.
If that comes to fruition we will be in recession for years.

 

[Tyberious Funk]

For an independent body, the actions of the RBA are starting to feel damn political.

I have no issue with rate rises. But I felt they should have been increased months earlier. Instead, the RBA seem to have held off to the very last minute, now they are panicking and putting on the brakes hard. Gee... I wonder what happened in the meantime? It wouldn't have been the Federal election?

 

[Evolved1]

3.75 they predicted by the end of the year.
There's only 2 more board meetings this year.

That's 0.75 each.
If that comes to fruition we will be in recession for years.

Who made that prediction?

 

[Number37]

Who made that prediction?

One of the bank economists.

In Feb the RBA said:

Market participants expected the cash rate to increase to a little over 1 per cent by the end of 2022 and to around 2 per cent by the end of 2023.

Repeated in March and April.

before the election
after the election.


In June the RBA said:

Market pricing at the time of the June meeting implied that market participants expected cash rate increases of more than 25 basis points on average at each meeting over the remainder of the year, with an expected cash rate of 2¾ per cent by December 2022.

In July the RBA said:

Market pricing implied that market participants expected the cash rate target to reach around 3 per cent by December.

 

[Evolved1]

One of the bank economists.

In Feb the RBA said:


Repeated in March and April.

before the election
after the election.


In June the RBA said:


In July the RBA said:

2.75 to 3% is a lot lower than the 3.75% you suggested earlier. We're already at 2.35% so you're looking at 2 or 3x 0.25% rises for the rest of the year unless I'm missing something.

 

[Gralin]

2.75 to 3% is a lot lower than the 3.75% you suggested earlier. We're already at 2.35% so you're looking at 2 or 3x 0.25% rises for the rest of the year unless I'm missing something.

the market is betting on above 3% by christmas

 

[Gralin]

Man this is an ugly graph

Economists predict slowdown for Australian economy as interest rates continue to rise

Soaring commodity exports and positive agricultural forecast expected to be balanced by Reserve Bank’s moves to counter inflation

www.theguardian.com

 

[Number37]

2.75 to 3% is a lot lower than the 3.75% you suggested earlier. We're already at 2.35% so you're looking at 2 or 3x 0.25% rises for the rest of the year unless I'm missing something.

One of the big bank economist said 3.75....based on the same data that the RBA is supposedly looking at.
The RBA has said 2, then 2.75 then 3...when the minutes for this month's meeting get released, it will probably be 3.25. Then next month it will be 3.75, no doubt.

 

[FRUMPY]

Man this is an ugly graph

View attachment 1501621

Economists predict slowdown for Australian economy as interest rates continue to rise

Soaring commodity exports and positive agricultural forecast expected to be balanced by Reserve Bank’s moves to counter inflation

www.theguardian.com

i quite like the graph, we had it easy for a fair while and could take advantage of it and pay down the loan a fair bit more and save for when it inevitably was going to rise again.

 

[Gralin]

i quite like the graph, we had it easy for a fair while and could take advantage of it and pay down the loan a fair bit more and save for when it inevitably was going to rise again.

yeah but you're a campaigner so there's that too

 

[FRUMPY]

yeah but you're a campaigner so there's that too

typical mod behaviour - anyone else would get banned/or post deleted.....

 

[Evolved1]

yeah but you're a campaigner so there's that too

FRUMPY is right. Current interest rates are historically low and anyone who bought at the peak is owed no sympathy.

 

[Gralin]

FRUMPY is right. Current interest rates are historically low and anyone who bought at the peak is owed no sympathy.

I see you're a bit of a campaigner as well, interest rates going up only benefit people that don't have mortgages

anyone happy to see this kind of increase in this short time while everything else going up as well can * off

 

[Evolved1]

I see you're a bit of a campaigner as well, interest rates going up only benefit people that don't have mortgages

anyone happy to see this kind of increase in this short time while everything else going up as well can * off

It doesn't benefit me at all even though I have no mortgage. The whole point of interest rate rises is to curtail inflation, so either you support interest rate rises or rampant inflation that will hurt the poor more. A side benefit of interest rate rises is a reduction in property prices to help young people get a foot in the market.

 

[Gralin]

It doesn't benefit me at all even though I have no mortgage. The whole point of interest rate rises is to curtail inflation, so either you support interest rate rises or rampant inflation that will hurt the poor more. A side benefit of interest rate rises is a reduction in property prices to help young people get a foot in the market.

no mortgage, like I said, the people happy with this don't have mortgages

 

[Carn The Berries]

no mortgage, like I said, the people happy with this don't have mortgages

I have a mortgage and I completely agree its the right thing to do. Inflation is absolutely rampant at present and interest rates have been unsustainably low for years now. Yes, it should have started earlier and it's a very blunt force way to impact the economy, but it is absolutely the right thing to do. You can't have inflation >5% and interest rates so low that people are basically borrowing free money.

 

[Gralin]

I have a mortgage and I completely agree its the right thing to do. Inflation is absolutely rampant at present and interest rates have been unsustainably low for years now. Yes, it should have started earlier and it's a very blunt force way to impact the economy, but it is absolutely the right thing to do. You can't have inflation >5% and interest rates so low that people are basically borrowing free money.

I think the monetary policy used to justify interest rate increases right now is complete bullshit.

We don't have an issue with wages being too high and people having too much disposable income, we have shortages due to war and a pandemic

all they are doing is screwing the people already struggling for corporate profits

it is absolutely not the right thing to do

 

[Carn The Berries]

I think the monetary policy used to justify interest rate increases right now is complete bullshit.

We don't have an issue with wages being too high and people having too much disposable income, we have shortages due to war and a pandemic

all they are doing is screwing the people already struggling for corporate profits

it is absolutely not the right thing to do

How long do you wait to lift interest rates that are unsustainably low? It will help to put the brakes on what has become a ridiculously over-heated property market and keep inflation at a point that is vaguely manageable.

The other added benefit is, by getting away from ~0% cash rate, it gives the RBA some level of room for economic stimulation, if conditions down the track require it.

What do you suggest we do to try and curb/stifle inflation? Just sit back and go "well.. can't f*ing do anything about it, out of our control"? In the words of my favourite teacher at school "it's not your (our) fault, but it sure as s* is your (our) problem)".

Like I said, yes, it's a blunt force implement for dealing with the issue, but it's also a bloody effective one.

 

[Gralin]

How long do you wait to lift interest rates that are unsustainably low? It will help to put the brakes on what has become a ridiculously over-heated property market and keep inflation at a point that is vaguely manageable.

The other added benefit is, by getting away from ~0% cash rate, it gives the RBA some level of room for economic stimulation, if conditions down the track require it.

What do you suggest we do to try and curb/stifle inflation? Just sit back and go "well.. can't f*ing do anything about it, out of our control"? In the words of my favourite teacher at school "it's not your (our) fault, but it sure as s* is your (our) problem)".

Like I said, yes, it's a blunt force implement for dealing with the issue, but it's also a bloody effective one.

yes they make fixing the economy our problem but the people that cause the problems get to keep doing that

the RBA is part of that machine

 

[Carn The Berries]

yes they make fixing the economy our problem but the people that cause the problems get to keep doing that

the RBA is part of that machine

Hang on, you just said that rampant inflation wasn't caused by us. Which one is it?

 

[Mofra]

How long do you wait to lift interest rates that are unsustainably low? It will help to put the brakes on what has become a ridiculously over-heated property market and keep inflation at a point that is vaguely manageable.

The other added benefit is, by getting away from ~0% cash rate, it gives the RBA some level of room for economic stimulation, if conditions down the track require it.

What do you suggest we do to try and curb/stifle inflation? Just sit back and go "well.. can't f*ing do anything about it, out of our control"? In the words of my favourite teacher at school "it's not your (our) fault, but it sure as s* is your (our) problem)".

Like I said, yes, it's a blunt force implement for dealing with the issue, but it's also a bloody effective one.

As Stiglitz noted, inflation this time around isn't broad based aggregate demand rising, it's sectoral. The reality of central banks' "blunt lever" doesn't account for this.

There have a been a number of (academic) criticisms more generally about Governments 'pretending' that central banks are independent when in reality they have to set monetary policy in response to outcomes caused by government fiscal policy.

Stiglitz's proposal for a sector-focused wealth tax to curb inflation and assist with budget repair makes sense by sadly, few governments around the world would have the political capital to enact it.

 

[Carn The Berries]

As Stiglitz noted, inflation this time around isn't broad based aggregate demand rising, it's sectoral. The reality of central banks' "blunt lever" doesn't account for this.

There have a been a number of (academic) criticisms more generally about Governments 'pretending' that central banks are independent when in reality they have to set monetary policy in response to outcomes caused by government fiscal policy.

Stiglitz's proposal for a sector-focused wealth tax to curb inflation and assist with budget repair makes sense by sadly, few governments around the world would have the political capital to enact it.

I don't think central banks can ever be truly independent of Governments, by their very nature they have to react to economic conditions caused, at least in part, by the Government(s) of the day.

I agree with Stiglitz's observations, to a point. While the underlying drivers of current inflation are specific to some sectors, the nature of those industries (e.g. fuel prices) impact almost every other sector in the economy. I just can't fathom that the RBA can do anything else other than raise rates in this environment. Yes, its going to make life more difficult, but the external inflationary impacts so absolutely no signs of slowing, so there need to be action taken to curb it where possible.