This is amusing. While most informed observers are arguing the RBA's dovish Board, which is (6 doves/1 neutral/2 hawks) majority controlled by conflicted business executives, has hampered the ability of officials to meet their formal inflation-targeting objectives, my old mate Paul Howes wants the Board shaken-up so that it can cut rates pronto irrespective of the inflationary consequences. Say hello to the 1980s folks! Comments like these pretty much kill off any chance we had of getting some union representation back on the Board. According to The Australian:
"The Australian Workers Union boss called for a change in the RBA board's make-up, saying the current directors had allowed rates to remain high for too long, and lashed the quality of advice from Treasury bureaucrats.
“We have a situation where manufacturing, agriculture, tourism, are all under huge threat, frankly because of inaction by the RBA, some pretty dodgy economics from Treasury,” Mr Howes said in a speech to Labor MPs today.
“He said it was imperative that interest rates were lowered to kick start the vital economic sector. “Frankly if the Reserve Bank's current directors are not going to act on this we need to review the make up of the RBA,” he said.
“I'm not advocating re-regulating the way interest rates are set, but we have to recognise the fact that it is not sustainable for our economy to have interest rates that are so much higher than the rest of the world and to think that a dollar sitting between parity and $1.10 is normal or our economy is adjusted to deal with it.”
Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
If you liked this article you'll love the Switzer Report, our newsletter and website for trustees of self-managed super funds. Click here for a FREE trial and to hear more of Peter’s expert commentary and advice.