Via Jonathon Shapiro at the AFR late yesterday:
Housing bears are famous for hearing what they want to hear. And last week, Reserve Bank assistant governor Guy Debelle made it very easy when he dared to suggest that “quantitative easing” was a policy option.
For the bears, who appear to be revelling in each set of weak auction clearance numbers, it was further vindication that the financial system was on the brink of calamity – and the central bank was preparing for the worst.
But Debelle’s QE revelation obscured the RBA’s real message: That the bears have failed to appreciate how resilient the economy and the financial system are to the mounting challenges it faces from both home and abroad.
That came across in Debelle’s speech last Thursday and in an address on Monday from deputy governor Chris Kent.
The message from Martin Place is that the Australian economy is growing and unemployment is low and falling. And if there was to be a period of weakness, policymakers have plenty of powerful and proven options at its disposal to counter a downturn.
It’s nice to be noticed even if being an unconscionable “bear” is, in reality, an eight year record of outfoxing the RBA and its peloton of captured bank economists and media.
In that spirit, let me offer some free advice to both the AFR and the RBA on forward communications. When a central bank with a breathtakingly bullish outlook suddenly divulges that it is in “uncharted” waters navigating a property correction, and starts obsessing over credit risk (expressed through widening spreads), as well as canvassing nuclear policy options, the message to the market is that it is becoming pretty damn anxious, not that it is growing in confidence.
I’m staggered that the RBA does not know this. It’s the functional equivalent of Obiwan Kenobi using his Jedi mind control powers to order someone to shoot themselves and then blaming them for being dead.
Feel free to pass the message back to the RBA, Jono. If you like, add that the passage of the housing bust is not so very “uncharted” and that they’ll be slashing rates by June 2019.
