Once he ran a non-bank lender. Now he’s singing a different tune, at the AFR:
Nicholas Gruen, Lateral Economics chief executive and a former adviser to Labor treasurer John Dawkins, said the RBA was “pushing on a string” with near-zero interest rates and the fiscal policy of governments had rightly picked up some of the slack during the COVID-19 crisis.
“People think housing is a way to grow wealthy, but rising house prices add nothing to production,” Dr Gruen said.
There are 869 words left in this subscriber-only article.
Start your free 14-day trial today!
“It also makes the economy very brittle because when your house prices are seven to eight to nine times earnings, house prices can fall a lot further.
…IFM Investors chief economist Alex Joiner said the limits of effective monetary policy were now being tested and the RBA was looking to governments to support economic growth.
“Fiscal policy both in the form of direct stimulus, which is relatively easy spending taxpayer money and highly visible. And more importantly an aggressive reform agenda to bolster much-needed productivity growth – this, while more necessary for the economy, is more politically difficult and less visible to the electorate,” Dr Joiner said.
Industry Superannuation Australia chief economist Stephen Anthony said the RBA expecting a significant flow through for asset prices was a “one-card trick”.
Quite right. And never more important than now, as we enter our great China decoupling. The agenda needed writes itself:
- mass productivity reform including huge infrastructure investment;
- competition and innovation reform;
- low dollar reform;
- end negative gearing, capital gains and superannuation middle class welfare;
- slash immigration;
- energy reform to crater prices.
Of course, none of it will be done, meaning that eventually, the market will force an adjustment upon Australia that does it all in one big, gut-wrenching hurry or, if it is feeling more friendly (that is, there’s no global inflation), via another couple of lost decades.
But not this year!