It’s not an easy job, being the Governor of the Reserve Bank.
Glenn Stevens may have the benefit of hundreds of boffins feeding him historical data about the performance of the economy. But at the end of the day, no-one can see into the future. Interest rates are set in the Governor’s gut and those of his eight fellow board members.
And my gut’s telling me they should cut next week. There have been three important developments since the board last met. First, commodity prices remain off their highs, boding ill for investment and jobs in the previously red-hot mining industry. In his last statement, Stevens observed commodity prices had “fallen sharply in recent weeks”. Indeed, the price of Australia’s biggest export, iron ore, had tumbled to around $US86 a tonne.
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Reserve Bank Governor Glenn Stevens put it eloquently yesterday when he complained that economic discussion in this country has “reached a rather curious position”.
An objective observer arriving from overseas, according to the Governor, would feel that Australia’s glass is at least half full, but Australians themselves are “grimly determined to see our glass as half empty”. In a speech to a business lunch in Adelaide, Stevens said: “Numerous foreign visitors to the Reserve Bank have remarked on the surprising extent of this pessimism.
“Each time I travel abroad I am struck by the difference between the perceptions held by foreigners about Australia and what I read in the newspapers at home.”
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Now I have vacated the job of helping edit news.com.au, let me reveal my dreadful desire to write an almost unthinkable headline: “Rates hike means more gain for savers”.
It’s pretty well inconceivable that any major media outlet would lead with this sentiment for fear of alienating all the hard-pressed homeowners, the millions of working families and Aussie battlers feeling the pinch in the ever-tightening mortgage belt.
This holds true from the most rabid reactionary radio shock jock, through the marching minions of Murdochdom (I am yet to hand back the company-issued electric shock collar), to the fairy floss fops of Fairfax and even unto the ABC commissars of collectivist cant.
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It’s time for a hard conversation about money. Some Australians, it seems, have literally bet their houses on interest rates staying at the current record lows.
There’s a stock-standard way of reporting the outcome of a Reserve Bank meeting in which the board decides to leave the target cash rate unchanged. You’ll have heard it on radio: “Homeowners can breathe a sigh of relief after the RBA left interest rates on hold”.
But with interest rates as low as they are, any homeowner who is really holding their breath waiting for the RBA decision these days is, quite simply, living beyond their means.
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