How did the RBA turn into such a lunatic?

Domain probes the question today with Shane Oliver:

“They just got it wrong,” he said.

And the Kouk:

“The emphasis has been on the unemployment rate but once you look at under-employment you see households are struggling,” he said.

“Around the world, in the UK, the US, across the Tasman in New Zealand, these are countries with much lower unemployment rates and they are still having trouble getting wages and inflation up. Australia is part of that phenomena.

“Factor in the fall in house prices and that wealth effect, which the Reserve was denying was a factor for so long, and you get to this point.”

Failing to appreciated the structural change in the labour market was a big part of it. In itself the question is worthy of a long thesis but it boils down roughly to this:

  • denial about the impact of LNP policy hostile to workers;
  • denial about the output gap as peak debt limited the consumer;
  • denial about the role of part time “bullshit jobs” in the services economy;
  • denial about a housing crash being manageable;
  • denial about the heavy impact of the immigration supply side shock, and
  • denial about how bad Australian resource policy has become.

That, in turn, points to the real problem. The RBA relied upon models of the economy for its forecasts rather than reading the economy changing before its closed eyes. It only needed to pay attention to MB to see. It was bloody obvious.

But the Bank preferred to rely upon Martin, its artificially stupid dynamic, stochastic equilibrium robot moron instead. All Martin ever does is draw a line back to trend from any deviation. He should be boxed as an arcade amusement in a circus sideshow doing 20 cent fortune telling.

Ultimately, that leads one further corollary, the most important of all. What kind of public service culture unquestioningly relies upon an artificial imbecile instead of history, intellect, empirical observation and creative outreach?

One that is closed, group thinking, defensive, arrogant, isolated, narcissistic and totally out of touch with reality.

Good people, I present to you the Reserve Bank of Australia in all of its ignominy.

 

Comments

    • Torchwood1979

      And where is the MSM in all of this? Reading the galah’s in everything from Newscorp to Fairfax to The Guardian you get the impression that cutting rates to 1% by November is some sort of early present from Santa.

      Good on HnH for sticking the boot in.

      • MSM is too fixated on the Labor leadership (which honestly post election no-one should even care about), while ScoMo does his best Nero impression by going on a Trump style “Thank You” tour.

      • When the mainstream media is not busy virtue signaling its crypto-Leftist, Pseudo- Social Justice Warrior credentials and agenda to the masses, it cherry picks information and presents it in a vacuum of context.
        Just look at the likes of Lisa Wilkinson and her “Red Pirate” bandana wearing husband.

      • Torchwood1979

        @Gavin, I’m quickly concluding that quality journalism is almost dead. There’s always been dross, but the lack of critical analysis about the direction our nation is headed is quite terrifying. ScoMo gets a majority thanks to his deals with Palmer and Hanson yet the galahs are swept up in the moment calling it a “miracle” when the Liberal primary vote shrunk just as badly as Labor’s.

        Anyway, did you see Bachelor in Paradise? I sure didn’t. Well, I saw a clip of it in a waiting room once. Some 6′ tall American guy was saying he’d never had much luck with American girls so he was hoping for luck with Australian chicks. And I’m thinking,”You live in a country of over 300 million people and can’t get a girlfriend?!!!”

    • Enquiries have doubled!

      (From two to four?)

      Perth stock on market is 15000 and sales about 500 per week. Ie 30 weeks of stock.

      If sales suddenly double (which they won’t – enquiries are not sales), sales volumes will be back to 2015 levels.

      2015. Sounds good. Oh wait. That’s when prices were falling. Just like 2014, 2016, 2017 and 2018.

      And is there more credit available now than in 2015?

      Nope.

    • Upcoming auction numbers should be interesting. If confidence really is up, it should lead to more listings but if credit is still difficult to access the clearance rates and volumes will remain low.

  1. Spending too much of their time in their Ivory Tower at Martin Place and sucking up to their masters in Canberra. These guys are not just any public servants they consider themselves the elite of society.

    Lowe and Co should have gone out and visited businesses and peoples homes to understand the problems in the economy. A deluded bunch of academics relying on fake numbers supplied by a gutted ABS . He absolutely has no idea of reality or how living standards have been crushed for most Australians.

    • The ABS are definitely not producing fake numbers. The ABS data is 100% showing that households are struggling. The ABS data shows that, in inflation adjusted terms, hourly earnings peaked years ago. For instance, in NSW and VIC, real hourly earnings peaked in March 2012. (see today’s other article: https://www.macrobusiness.com.au/2019/05/australias-five-years-wage-falls/).

      Politicians and their sycophantic execs within Treasury and the RBA just misuse them. MacroBusiness is one of the only places that even vaguely attempts to use economic data properly.

      • Here in Straya, we no longer analyze realities. Instead, we create new realities for the people of Straya.

        After all, how often do you see expert economists at reputable MSM being “surprised” at each release of new data? This proves beyond doubt that all these data coming out of the ABS are wrong.

      • dumpling, you do realise you sound very much like the people you’re railing against. Creating your own reality. That’s despite the fact that this place is showing you how to correctly use ABS data. Note that the ABS has never, ever, been one of those ‘reputable’ economists that are surprised by the numbers. Trust me, they dont fabricate their work.

      • Of course, the ABS are releasing data in the old fashioned way and the expert economists at reputable MSM are “surprised” because they do not match the newly created reality.

        You see, “surprised” is a code word that conveys a thinly veiled threat to the ABS to get in line.

  2. Curse these DSGE models!

    The “model told me so” narrative, has become so pervasive throughout treasuries. Complexity has been used as a proxy for usefulness/accuracy. Some (not all) of these Treasury execs are sycophantic frauds when it comes to their use of these models. Case in point – those post-GFC wage forecasts.

    At times, they’re wonderful at shining light on nuanced and interesting questions, but are now being used by execs to fit pre-existing narratives – knowing fully well that their inevitable errors will be easily narrated away.

  3. TBH, i watched Lowe on da tele the other day and he did look like he could be missing a chromosome….just saying…

  4. TailorTrashMEMBER

    Has Martin been having a quiet affair with one of your telefunken sprukebots …..that might explain a bit ……

  5. HadronCollision

    So, you’re not a fan?

    Also, who calls their model after their HQ’s eponymous address.

  6. Jumping jack flash

    “Around the world, in the UK, the US, across the Tasman in New Zealand, these are countries with much lower unemployment rates and they are still having trouble getting wages and inflation up. Australia is part of that phenomena.

    “Factor in the fall in house prices and that wealth effect, which the Reserve was denying was a factor for so long, and you get to this point.””

    Pfft, bankers. They’ll never admit their debt is causing the problems.

    The “wealth effect” is just the ability and desire to take on more debt, enabled by the expansion of nonproductive debt.

    The common factor between all of these countries is enormous quantities of private nonproductive debt.
    Debt must be used to build productive capacity so it can at the very least generate more income than the interest takes out.
    Spending debt on nonproductive houses and then calling their inflation as a result of that spending “productivity”, is just wrong.

    Now, we have trillions of nonproductive debt dollars and their interest must be repaid by sucking away the productive dollars. Those productive dollars can no longer be used to increase wages and fund new full time positions.

    We get an overall sinking effect as hours are cut and wages stagnate (stolen by the next rung up through substitution of cheaper labour) to fund their existing nonproductive debt, or used to obtain new nonproductive debt.

    It is really very, very simple what is happening.

    The strange thing is they still think by helping their mates’ banks they can help the economy. Cutting the cash rate, QE, loaning the banks the printing presses… none of it will do a single thing to help a single worker spend more real money. Oh sure, it may help that worker to take on more fake, nonproductive, debt money and spend it, but that money is not free. It costs real money to spend fake debt.