From the AFR, economic heavyweight, Bob Gregory, has responded to this morning’s RBA board member’s attack on surplus politics:
Respected former Reserve Bank of Australia board member Bob Gregory has said the central bank is becoming more focused on adjusting monetary policy “month on month”, leaving it vulnerable to “political mucking around”.
Professor Gregory said this was a “major change” in the way the RBA operated – given its long-standing goal of guiding the economy one to two years ahead – and could lead to more policy makers speaking openly outside the normally private forum of the board.
Is that an attack or not? Perhaps a gentlemanly reminder. Then again, perhaps not:
Professor Gregory said calls for spending on infrastructure should be taken seriously, and rejected the view that this was akin to loading up the national credit card.
But he went on:
“For example it used to be believed, not that long ago, that it was important that monetary policy be reasonably slow moving and focused on one objective,” he said. “The objective was clearly on what the inflation rate was going to be in one or two years ahead, and one did not react month-to-month.”
“Unless there was crisis [such as] in 2008 – and they didn’t come along very often – it was steady as she goes.
“Our central bank is now prepared to react much quicker, much faster and more often. They are moving to this one month reaction business.”
Hmmm, that may be the case in volatile times when the world has several huge structural adjustments underway at the same time.
But it isn’t true of today’s discussion, which is about fiscal spending rising to offset an obvious and rather nasty forthcoming blow to growth mid-year as mining investment begins to fall. There’s nothing month-to-month about that.
Bernie Fraser also kicked in that he is in favour of appropriate infrastructure spending.