Warwick McKibbin has jumped in with a big “told you so” this afternoon courtesy of Chris Joye at the AFR:
“I would not personally have cut rates in October or December,” McKibbin says. He believes that “barring any disasters out of the US and Europe, the RBA’s easing cycle should be over…It will become increasingly important for the RBA to normalise what are extraordinarily stimulatory interest rates given the striking asset price inflation we are now seeing coupled with the economy’s nominal growth. I would not rule out two hikes before the year is out,” McKibbin told The Australian Financial Review.
Here’s the R.P. Data daily house price index to the day:
Some other indexes are more bullish but together they paint a picture of slowly accelerating gains. After 175bps of cuts over a year, they they do not stick out as “striking” in my view.
Mr Joye himself goes on:
Egged on by a growth-centric board dominated by commercial interests, the RBA alleged that the sharp decline in iron ore and coal prices had materially affected resources companies’ spending plans. It claimed that this change in the outlook necessitated even more cuts on top of the 125 basis points worth of relief it had baked into the economy to insure against the risk of a severe global downturn.
It’s a simple fact that the iron ore crunch smacked mining investment plans. And that the LNG boom has effectively gone bust at the same time. Mr Joye seems more intent of self-serving revisionism than useful commentary.
The discussion that needs to take place here is not cheap point scoring over rates, it’s what matrix of stimulus is going to carry the economy over and through the mining investment cliff.
