There is absolutely no evidence or even studies to produce evidence that the RBA provides any value to the Australian people. Anything the RBA does could be undertaken by the private banking sector. In fact the RBA can only perform three types of tasks.
- Tasks that the private sector would or are undertaking given the opportunity
- Tasks that protect vested interests inherent in government policy ie major banks
- Taking market based initiatives that are bound to be wrong.
The absence of evidence is not evidence in support of the RBA doing anything that is marginally useful. Nor is the argument “if the RBA hadn’t acted in this way, we would have had a disaster”, of any validity whatsoever. But please if you have evidence then I’d love to see it.
Increasing or decreasing an overnight cash rate is a task that can be adequately undertaken by the markets based on the availability of funds. Interest rates set by the RBA can only be as the market would set them or wrong. Yes wrong! For the broader Australian community rather than vested interests, if the RBA sets a different rate than that which would have been set through an open bidding arrangement then the RBA has distorted the flow and price of capital in favour of one market segment over another. It matters not for this argument whether this is by luck or design. The RBA can only influence the markets by getting it wrong.
Do I have to make the case that private enterprise could create a cash liquidity clearing house(s) without an RBA? The RBA can only add to such an arrangement by funding those that shouldn’t be funded.
Besides the RBA only influencing through getting it wrong, they may even have lost that ability at the moment. Due to our over reliance of offshore debt, setting the cash rate lower would certainly have a negative effect on attracting offshore lenders so whilst reducing rates to stimulate, the RBA would reduce the availability of credit. Of course the reciprocal is true as well, in which case the RBA’s monetary policy is currently all but useless at the moment.
Lastly if you would like the government to set up an organization that can control the flow of funds then not only must they be able to set the cost of credit, they must also have the ability to control the terms or availability of credit and the risk to the system of making that available. An organization with both the powers of the RBA and APRA combined. At that point we may as well nationalise the banking system. We have a pseudo nationalization currently so why not?
The banksters with their snouts in the trough love the current system. The RBA can only distort the system which through political hysteria seems to be mostly in their favour. APRA the arm of government which could have significant influence reigning in the banks excesses and easing the burden of borrowers does not have the correct mandate although it has the powers to take action. Being caught in the middle they are easily bullied by the major banks which turn controls to their advantage.
Australia has a dysfunctional system and if we hang off RBA minutes to glean anything of use or influence the we’re deluded.