Deep T. Special: How low do Aussie interest rates have to go?

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Official interest rates are heading negative everywhere that public and private debt levels are at record highs on every measure. Australia fits squarely at the top of the pile. No doubt influencing Australia’s central bank, the RBA, to reduce the official cash rate a further 25bps in August. Whilst predictable the explanation in the RBA minutes seems more confused than informed, more noise than signal.

Whilst the RBA seems to sweat on inflation, unemployment, income and growth numbers throwing in house prices, debt levels and what’s happening with the $A and in the rest of the world, so does every other central bank. Its central bank think. Figures like GDP, unemployment and inflation are constructed measures whose meaning is determined by the input, the algorithm and the interpretation. Things of beauty to any central bank bureaucrat and mostly weapons of obfuscation and deception.

This collective yet disciplined behaviour means that all central banks, no matter what narrative is portrayed ultimately do the same or similar things. It’s not a conspiracy but collective behaviour triggered by the same noise and motivations. But, behaviour is predictable if you look for the signals and remove the noise.

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