Australian interest rates

Via The Australian: The Reserve Bank of Australia has scope to ease monetary policy settings further if it wants, and any suggestion that its firepower has run out can be dismissed, Ian Harper, a member of the central bank’s policy-setting board, told the Wall Street Journal.

From Gareth Aird, Head of Australian Economics at CBA: Key Points: We expect the RBA to ease monetary policy at the November Board meeting and we expect a suite of measures to be announced.

From CBA’s head of Australian economics, Gareth Aird: We expect the headline CPI to increase by 1.4% in Q320 (+0.5%/yr). The trimmed mean CPI on our forecasts will print at +0.4% (+1.2%/yr).

Via FTAlphaville: MMT is a theory that people love to love, and love to hate. The idea, which stands for Modern Monetary Theory, is frequently cited by academics and politicians on the left as evidence that the state has further capacity to spend without serious consequences to the economy (yet!).

Via Bill Evans at Westpac: Our views on the likely decision by the RBA on November 3 have been clear since our note on September 23.

In his recent Lowy Institute commentary, RBA alumnus John Edwards demanded MOAR: Just as the Australian government has little choice but to continue for some time with the expansionary fiscal stance it adopted in response to the pandemic, so too the RBA has little choice but to continue its expansionary monetary stance.

From Roy Morgan Research: In September Australians expected inflation of 3.3% annually over the next two years, up 0.1% points on the record low in August.

More monetary drivel from the AFR yesterday: Considerations on the strength of the Australian dollar and the significant drag on the economy because of Victoria’s lockdown were two key factors that influenced decisions on further monetary easing bias, the minutes reveal.

Via Bill Evans at Westpac: The Minutes of the October Board meeting of the Reserve Bank of Australia confirm the key themes of Governor Lowe’s speech which was delivered on October 15.

Back in 2016, Australian economics titan, Tim Toohey, forecast a new Australian boom: Goldman Sachs has upgraded its Australian dollar and economic growth forecasts.

Last week I offered a few suggestions to Australia’s league of failing economists in the hope that some might escape the mediocrity of debate that is holding the nation back.

From Westpac chief economist Bill Evans: I had expected that the events this week would be highlighted by the stunning 11.9% surge in the Westpac-Melbourne Institute Consumer Sentiment Index.

The RBA has finally made it to where it should have been ten years ago: Turning to the broader policy question, we have been considering what more we can do to support jobs, incomes and businesses in Australia to help build that important road to the recovery.

It’s the same every time we face this question.

They are finally, slowly, catching up.

Via Deflation Phil just now: The Recovery from a Very Uneven Recession Philip Lowe[*] Governor Citi’s 12th Annual Australia and New Zealand Investment Conference Sydney – 15 October 2020 It is a great pleasure to be able to join you today.

WTF is this world that we are living in! Via the AFR: Treasurer Josh Frydenberg has strongly resisted suggestions to embrace so-called modern monetary theory (MMT), whereby governments force central banks to print money to fund fiscal expenditure.

Via the AFR comes a second sane dude today: The Reserve Bank’s recasting of the narrative on quantitative easing is part of a pattern of backflipping on policy statements, says bond fund manager Charlie Jamieson, that he and the market agree will lead to a rate cut on Melbourne Cup day.

Via RBA sockpuppet, Terry McCrann: But because it would be not just a rate cut now; in these ‘living-with-the-virus’ days, it’s become a ‘rate cut-plus’.

Via Bill Evans at Westpac: RBA more dovish than September; setting the scene for a further rate cut next month.

The entirety of the Australian front end bond curve has slumped to all-time lows this morning, everywhere from one to five years maturity: The very short is only at 10bps, clearly eyeing off a rate cut and, before long, the negative.

Leith has nicely summarised the new budget: In normal times, I would not have any major concerns with this budget.