Is the RBA in neutral or reverse?

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by Chris Becker

The RBA has kept its cash rate at an historic low of 1.5% since August of last year and in the doldrums for over five years, with many commentators suggesting this is acting as a huge stimulus effect on the economy:

The housing economy has definitely seen the benefit of low interest rates, but unlike past economic cycles, the rest of the economy is not feeling this stimulus as wage pressures and non-tradeable inflation dissipate. Last week the new Governor of the RBA, Guy Debelle spelled out a return to a “neutral” setting of 3.5%, in what was not one of the central bank’s best attempts at talking down the markets. The Aussie dollar screamed higher before Debelle and Philip Lowe talked this sky-high (sic) figure down.

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