October 17, 2019

On Tuesday, 1st October 2019, the Reserve Bank of Australia cut the cash rate to 0.75% in order to stimulate the economy. Their objective was to reduce the unemployment rate to 4.5% and to increase wages. Over dinner that night, my daughter Kate quizzed me and Frank about how that worked. It turns out that it is not as obvious as Dr. Lowe suggests.

Kate:

I see that the Reserve Bank has dropped the cash rate to 0.75%. What is the cash rate?

Frank:

It is the rate that the Reserve Bank charges the banks for overnight loans.

It is the basis on which other interest rates are set. For instance, if the ra...

September 24, 2015

We are pleased when the Reserve Bank keeps interest rates on hold at their low, low levels. For we know that low interest rates encourage consumer spending and that is good for the economy. Where did we learn these fallacies? And why are they perpetuated by our politicians and financial journalists?

 

Our new Prime Minister, Malcolm Turnbull, has indicated that he wants us to be optimistic about the future and his government’s ability to create a prosperous, high wage economy.

 

Now a high wage economy cannot be achieved by fiat. It cannot be achieved by increasing the minimum wage and having that...

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