From the AFR:
The Reserve Bank of Australia’s move to a “neutral bias” on monetary policy has angered the Abbott government, which believes any upward pressure on the dollar makes economic management in the next two to three years more difficult.
The central bank has been informed directly of Treasurer Joe Hockey’s displeasure.
The Reserve Bank shifted to a neutral position on future interest rates in February when board members indicated they were finished with a two-year cutting cycle.
Monetary policy had been on an “easing bias” – an expectation the next move in interest rates would be down.
The central bank signalled it had little choice but to shift position in February after a rebound in key economic indicators, including for inflation.
I agree, Joe. If the Budget is forced to round up its dollar forecast to 94 cents then nominal growth and revenues will come down.
But the interesting question this morning is where does this story come from? If it’s from the Government then it’s clear that they are losing faith in the Stevens RBA (with some justification, frankly). But a leak of this nature won’t effect RBA decision-making. Stevens has proved time again that he doesn’t care about politics. Though it could help the Government blame the RBA as its Budget forecasts deteriorate.
If the leak comes from the RBA then the pressure must be great indeed and it’s a warning shot to the Government to get off its territory.
Then again, it could just be loose lips with no agenda.
