From the AFR comes Professor McKibbin:
“If we ever got to a situation that Europe or Japan is in, I’d move straight to helicopter money. You bring down the barriers between the fiscal accounts and the monetary accounts. Therefore the government spends and puts money in the hands of people. It’s really a last resort measure and you need a way to rein in the inflationary pressures once they emerge.
Mr Rainbow chimed in:
“This is a contingency; it’s not a plan,” he said. “If you’re growing at trend around 3 per cent, unemployment is 5.8 per cent and observing employment growth then we’re not in a circumstance where we are required to give huge additional stimulus from monetary policy.”
“I don’t think it would be worth taking a risk of unconventional policy when you haven’t exhausted conventional policy,” he said.
I would have thought it worth a thought along the lines Professor McKibbin’s old idea of printing money for specific portfolio flows into the currency.
Anyway, the McKibbin notion of deploying the helicopter before QE does have merit in-so-far-as it avoids the kinds of asset price inflation we’ve seen in the use of QE and channels the dough into more productive uses (so long as you keep Christopher Pyne away from it).
And that’s the real issue here. What would Australian Governments do on that kind of heroine injection? I can see unbelievable levels of free pork.
It still assumes away my question, though, which is that this kind of policy is likely only to be needed mid-crisis, and in that environment Australia is not going to have either a capital inflow problem nor too strong currency. On the contrary.
I remain skeptical that we can do any unconventional policy at all.
