The wildly successful television program Seinfeld was promoted as the “show about nothing”, but fans really knew it was about everything in our lives. That’s why we’re able to relate to it. I suspect the Reserve Bank Governor, Dr Phil Lowe must be a fan of Seinfeld, which had nine seasons and 180 episodes.

Why? Well, when it comes to when interest rates will rise (which Dr Phil says is more likely to be in 2024), I think he must be channelling Seinfeld’s George Costanza, who once said: “It's not a lie if YOU believe it.”

Based on my 35 years of writing and commenting on interest rate policies in mainstream media, what I’m seeing in the economy right now screams interest rates will have to rise before 2024. I think it could be before 2023.

So is Dr Phil gilding the lily? No, that’s what a liar would do. I think this very capable Reserve Bank Governor is believing what he wants to believe, given the current set of indicators he’s seeing plus what he thinks will happen.

The RBA and Treasury will often work off conservative base cases when trying to ‘guess’ the future. That’s what I think he’s doing, when the more optimistic/bullish case might be more appropriate.

We get to see if he’s being too conservative today, with the National Accounts showing us how fast the economy grew in the December quarter.

The CBA has a guess number of 2.6% for the quarter and that’s HUGE. In America, they’d multiply that by 4 and say annual growth is 10.4%!

For our annual figure here in Australia, we add up the past four quarters. And because the March quarter was negative 0.3% and the June quarter was a big negative 7% (because of the Coronavirus lockdowns), our annual figure for 2020 will be a negative. But by mid-2021, that number will go massively positive.

Australia Economic Growth

In fact, looking at the December figure and multiplying by four probably shows what the real action in our economy is like right now. That’s why I think Dr Phil is doing a George Costanza. He wants to believe we are not doing so well, so he can keep interest rates as low and for as long as possible to really get a booming economy with rising wages, lots of jobs and a low unemployment rate. That’s when he’d think about raising interest rates.

I think that will come before 2024 for sure, but he’s allowing his hopes to affect his economic vision of the future.

Why do I say this? Well, try these:

• Westpac expects our home values to go up 10% this year.
• If your home is worth $1 million, that rise is $100,000 in a year. And if your place is worth $3 million, we’re talking $300,000. And that will give consumers a spike in their wealth, which should lead to big spending.
• The stock market is up 48.7% since March 23 and is tipped to keep rising strongly at least for the next two years.
• A $US1.9 trillion stimulus bill will soon pump up the US economy, Wall Street and the global economy and stock markets will love it.
• Last week, AMP Capital’s economics team predicted the US would grow over 6%, and this isn’t one of the biggest forecasts for the Yanks out there!

An economic boom is highly likely and that could eventually put pressure on Dr Phil to break his effective promise on interest rates.

That said, he has come up with a new approach for a central banker, in as much as he’s putting responsibility onto the banks not to let home lending get out of hand.

Usually, the RBA controls home loan interest rates but Dr Phil has put the onus on the ­nation’s banks to keep the lid on a rapidly inflating property market, urging them “to maintain high lending standards”, as he recommitted to keeping borrowing costs low for years. 

Home prices spiked 2.1% in February, which is the fastest rate of increase in 17 years. And new mortgages hit a record $29 billion last month and were 40% higher than a year earlier.

Now Dr Phil knows if the banks ignore his suggestion that they don’t lend too generously and stupidly, he can set APRA on to them. And APRA (to hark back on another Seinfeld episode) would simply do a Soup Nazi and instruct them to tell us: “No more loans for you!”

Personally, I’m not only a huge fan of Seinfeld but I also love Fleetwood Mac (which shows my age) and for Dr Phil I reckon he knows how useful the lyrics of that classic song “Little Lies” is when you’re trying to steer an economy out of a pandemic-created recession. I reckon he’s telling us “sweet little lies” and even I’m saying “you can’t disguise” how well our economy is doing and probably will do, because we need to keep it positive for our great economic potential to materialise, I love Dr Phil’s ‘little lies’. And Doc, don’t stop thinking about tomorrow!