Let’s replace Phil Lowe with a glacier

Gareth Aird at CBA  sees change at the RBA:

It’s very easy to miss little changes in the RBA’s communication.  But it’s very important to look at each and every word in the Governor’s post meeting statements and how his language evolves.  Changes to the statement each month are not made lightly.  Indeed words and sentences in the statement are inserted and deleted in meticulous fashion.  In that context, we think there was a very important addition in the Governor’s concluding paragraph today.  Specifically:

“the Board will maintain highly accommodative settings as long as is required and continues to consider how further monetary measures could support the recovery. (our emphasis in bold)”

This is the closest that we have been since the emergency mid‑March Board meeting to the Governor signalling that more monetary easing could be on the offering in his post meeting statements.  We do not know what form additional easing may take.  And we don’t think that more easing is imminent.  But it does suggest a slight shift in the Governor’s thinking.

Sure. But when? The RBA only just declared that there was nothing more it could do. Literally a few weeks ago. Is there now suddenly something it can do?

The truth is we’d be much better off replacing Phil Lowe with a glacier:

  • a glacier moves slowly but it does move and ever more swiftly as the world warms;
  • a glacier only flows downhill with interest rates without the fuss and expense;
  • a glacier has no brain so it can’t make stupid forecasts;
  • a glacier has no feelings so it wouldn’t support policies of internecine sentimentality like mass immigration;
  • a glacier has no arse-covering impulse so it doesn’t care about property prices;
  • a glacier has no wallet so can’t be corrupted by going into property investment or note printing itself;
  • a glacier has the implacable countenance one needs in a quantitative central bank versus the…err…soft bureaucratic pastiness of Deflation Phil.

Yep, we’d be better off handing monetary policy to a glacier. Just put a few signs up for it to mow down in the months ahead:

  • Operation Twist;
  • negative interest rates;
  • QE for the currency;
  • QE for the people.

You think I’m joking but the sad truth is the national interest would be better served.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)


  1. QE for infrastructure bank to build wealth creating projects – asset class should be determined by parliament but would include dams, energy transmission and generation, transport corridors, ports, airports, oil refineries and telecommunications – could also buy out transurban and buy back Darwin port

    • This is Australia. Unlimited QE for apartments, new home buyer/investor stimulus packages for the people, and free uni fees for all foreigners. That ought to fix thing.

    • You’d probably get more bang for your buck pushing pensioners and unemployed onto the RBA to monetise.

      Instant, partially counter-cyclical QE. ~15bn a month of fresh cash that will be spent into the real economy (not mortgages) within days to weeks.

      Of course, it’s effectively the same thing if the government then uses the ~200bn/yr of budget savings to fund other, much slower projects.

  2. happy valleyMEMBER

    So, the only things the RBA happy clappies do from one meeting to the next are play with words and work on ways to destroy savers and depositors? Give the good Captain an AC.

    • happy valleyMEMBER

      So many economists will be having orgasms at the prospect of negative rates. Truly, the corona of an economist’s career?

    • Coz it worked so well for the European banks? At least in Europe the banks don’t make up as much of the economy as in Aus.
      Negative rates for borrowers will start an outflow of deposits into other non-negative currencies and other stores of wealth.

    • Hang on. This is talking about cash rate. BCN is on about mortgage rates.
      Wasn’t the CEO of one of the big four in RC stating under oath that one actually doesn’t have all much to do with the other?
      A Negative Cash rate and a higher mortgage rate… I mean, why CAN’T both of you be right?

        • So, given that the banks have ‘done a deal’ with the Govt re the low mortgage rates and the mortgage deferrals, (loss making potitions for the banks), what is the other side of that deal where the banks can then cash in again? What can they do to claw back some of their profits?
          Thninking that, there must be a use by date on their deal and then they will be allowed to …….
          Raise mortgage rates…..
          Lower deposit rates…..
          Sell non-performing loans to the govt to fix their books….
          Redefine ‘responsible’ lending ……
          Extend the mortgage terms to 40 years…..
          Drip-feed some forclosure to the market, just to prove its stil an open and functioning process….

          • I think the call will be left to the govt of the time.. heres how that conversation might go “our cost of funds are increasing.. we have already brought savings rate to zero. Now we are left with either saving mortgage holders or take a hit to profitability.. in that profitability hit scenario, we cant pay dividends to shareholders. So which of your voters do you want to save.. the mum & dad negatively geared IP investor or the boomer with franking credits?”
            And the reason it will be left to govt is really because end of they day they have to bail the banks out.. so.. might as well go with which voter base they want to please.

      • happy valleyMEMBER

        Yep, the cash rate has nothing to do with the setting of mortgage rates – another lie from bankers and the punters suck it up. The bank bill rate (currently at around 0.1% pa, historic low and even lower than the cash rate) drives it, together with the “smoke and mirrors” from the RBA happy clappies.

    • Display NameMEMBER

      Cannot see how negative rates will make any difference. Have they “worked” anywhere else? How do you get back to sound monetary policy? Is it possible to get back? Or are we doing it because everyone else is and to not have negative rates is a national disadvantage?

      I cannot see how any of this ends well or with any sustainable solution.

    • Narapoia451MEMBER

      They made a return after the great dying, a period during which the polar ice caps disappeared. They’ll be back, just long after we have killed ourselves off.

  3. DLS, this is too much. No thinking glacier could possibly suffer from such overwhelming myopia and self-regard. Expect the process-servers anytime, from the International Glaciological Society and the Friends of the IGS.

  4. Jumping jack flash

    “… Governor signalling that more monetary easing could be on the offering…”

    Nah. Maybe in the future. Like Q4 2021 or something. He has to get up the nerve.

    Cutting rates was easy. Completely unwarranted, but easy. Completely imprudent, but easy. Almost too easy. Not really that much thought required.

    Flash forwards 20 years and there’s no more cuts to be had. Sh!t just got real and he has to take a bit of time out to have a good think about the mess he (and those before him) got everything into, and what might actually happen if he tries these weird and wonderful solutions-that-arent-solutions.

    Whats the alternative? Kiss debt growth goodbye and say hello to Japanese-style deflation for the next 40-50 years?

    He has to weigh up the pros and cons and that takes a bit of time, so let the man think!

  5. What is needed is monetisation. Not buying bonds off the secondary market or that nonsense, but a deliberate expansion of M2 month in the region of 7-8% pa on a sustained basis, with the expansion in the money stock driven by direct purchases of bonds from both the Commonwealth and States AND a deliberate and systematic increase in reserve assets. Ensure that base money expands driven by both net domestic and net foreign assets.

    Doing this would be brave, courageous and correct, which is why our cowardly politicians and central bankers won’t do it.

  6. Glaciers look benign .. until there’s an avalanche.
    There is something they can do, eg. Make up for 5 years of mistakes and target the price level where it should have been if inflation was on target ie if Lowe had of done his job like every other Governor since the start of inflation targeting to his tenure.