From our old friend the Kouk, who MB served up a shellacking for much of the last two years for his uber-aggressive bullishness, hawkish interest rate forecasting and surplus-drive budget ruminations:
Kouk officially forecast four rate rises for last year. Here is another sample of his musing from only 10 months ago:
The question now being discussed with gusto within the RBA is whether a 2.5 per cent cash rate is appropriate.
The answer is obviously a resounding no given the facts that inflation is picking up, exports are booming, consumer spending is strong, dwelling construction is hitting record highs and now that the labour market is on the brink of registering solid jobs growth.
If the additional information of massive house price growth, rising commodity prices and a low Australian dollar are thrown into the mix, the RBA decision to hike is a no-brainer and one that should be implemented very soon.
It must also be noted that global economic conditions are strong, with the US growth momentum solid, China easing policy to soften the risks it is confronting, while India and the Eurozone are reversing the poor news from 2013.
My hunch is that the RBA will be acting to hike interest rates in May. Arguably it should have hiked already, but a few month delay in the inevitable is neither here nor there. The RBA probably needs a bit of time to keep softening up the market for such a move but the reversal of views from Westpac and others on interest rates will help the RBA in this task.
By this time next year, the cash rate is set to be about 100 basis points higher than now – at around 3.5 per cent which is likely to coincide with the Aussie dollar back near parity.
Had the RBA followed his advice, the economy would now be in its worst post-war recession.
To his credit, Kouk eventually listened to MB’s “cutting and pasting” and was one of the first to join dovish MB forecasts for interest rates.
It’s very much OK to change your mind on stuff but rewriting history is poor form. It’s himself that the Kouk should be cross with.