Dear Reserve Bank of Australia (RBA) Board,
I am writing to you because the error the RBA Board is currently making with monetary policy is unnecessarily damaging the economy and society.
It is important that the Board acknowledge this error as soon as possible and set in train remedial monetary policy changes to limit the damage and indeed, ensure the economy is on a stable footing into 2025 and 2026 to retain low unemployment and rising real wages.
The current error, which I think is obvious to anyone with an open mind, is having monetary policy excessively tight.
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Simply put, interest rate settings are restrictive and based on recent public comments from RBA staff, the Board has no intention of easing policy.
The consequences of the Board’s error are meaningful and getting more acute.
Businesses are failing at an alarming rate, employment is lower than it would otherwise be, wages growth is slowing, inflation is low and there are signs of financial capitulation in a growing number of households.
A Yahoo Finance live blog will bring you expert predictions and commentary as the RBA decides the cash rate on Tuesday, December 10.
Every month that monetary policy is held to be too tight, these indicators of economic health will move further away from the desired level.
A clear-eyed view of the economy’s position should be enough for the Board to acknowledge its policy overkill and credibly signal the start of a less restrictive monetary stance.
The National Accounts data for the September quarter showed growth to be materially lower than forecast and even further below trend.
There are few signs of any pick-up in growth towards a pace that fits with sustained full employment.
Wage growth has slowed in line with the weaker economy and the surge in labour supply.
At an annualised pace of 3¼ per cent in the last half year, the moderation in wage growth will impart material downward pressure on services inflation, which was, admittedly, a hurdle for lower inflation a year ago.
Inflation is falling. Well done.
Policy has worked and there is no need to keep the economy under unnecessary pressure.
While part of the drop in inflation is linked to government policies on electricity and rents, the change in prices determined by the interplay of supply and demand are within the target.
