Saul Eslake | Economist

inside story. has published an article from me about the long-term slowdown in the #Chineseeconomy: https://lnkd.in/gVbDmg5j

Most of the 'advanced' world's central banks have now started cutting interest rates - some of them more than once. The Reserve Bank of Australia of Australia is now one of very few who haven't. Here's my thoughts on why they haven't yet, when they might start, and by how much they might cut rates when they do start: #LinkedInNewsAustralia

My presentation to this year's AgForce Queensland conference, on "Challenges and Opportunities for Australian and Queensland Agriculture", at the Brisbane Royal International Convention Centre, is available on my website here: https://lnkd.in/g_865ZcN

My interview yesterday with ABC News Channel's "Afternoon Briefing" presenter Greg Jennett is on my website here: https://lnkd.in/gnraAgSm

Today's edition of John Menadue's "Pearls and Irritations" blog (https://lnkd.in/gcfQXHWF) has an article from me about the apparently renewed interest on the part of the Albanese Government in winding back negative geqring and the capital gains tax discount. It's also on my website here: https://lnkd.in/gXPm8bjg

Today's monthly #inflation data is good news, but not good enough to 'shift the dial' for the #rba on #interestrates

As universally expected, the Reserve Bank of Australia left its cash rate unchanged - as it has since November last year - at 4.35%, after the Board meeting which took place over the past two days. The Board's post-meeting statement wasn't forthcoming as to whether the Board had again considered raising the cash rate, as it did at its previous meeting in August (although Governor Michele Bullock said in her post-meeting press conference that they hadn't). But it seems prettly clear that the Board didn't devote much (if any) time to discussing whether it should cut rates at this meeting, or even drop hints about the possiblity of rate cuts at either of the two remaining meetings for this year. It again emphasized that "underlying" inflation - ie, excluding the effects of temporary factors such as, in particular, "federal and state cost of living relief", and which is "more indicative of inflation momentum" - in its opinion "remains too high", and that "it will be some time yet before inflation is sustainably in the target range". It said that data released since its last meeting "reinforced the need to remain vigilant to upside risks to inflation", And whilst acknowledging that overall economic growth has been weak, it noted that "growth in aggregate consumer demand had remained more resilient" and that "labour market conditions remain tight". It again recognized that "there are uncertainties" - for example around the expected pick-up in consumer spending, about how firms' pricing decisions and wages will respond to slower economic growth, and about the global economic outlook. But these uncertainties carried less weight than the need for policy "to be sufficiently restrictive until the Board is confident that inflation is moving sustainably towards the target range". There's nothing here that prompts me to think that the Board will have the required degree of confidence that "inflation is moving sustainably towards the target range" until February next year (by which time it will have the December quarter CPI data, among other things). And that's despite the fact that all of the RBA's peers (with the exception of Norges Bank, if you count it among the RBA's peers) have started cutting rates. All of them started raising rates earlier than the RBA, and raised them by more than the RBA did (in the cases of the Fed and the RBNZ, by a full percentage point or more). Americans, Brits, Canadians and New Zealanders aren't getting income tax cuts: Australians are, and those tax cuts are equivalent (in terms of their impact on aggregate household cash flows) to two 25 basis point rate cuts. The one prospect that I am starting to think is becoming more probable is that when the RBA does judge that it is time to start cutting rates - which, to repeat, I don't think will be until February next year - they could make the first move a 50 bp cut, as the Fed did last week. But that will depend on the data, like everything else.

The Hobart Mercury has today published an op-ed article from me explaining why the Liberal-National Coalition's "Super for Housing" proposal is simply a 'souped-up' First Home Owners Grants scheme (except that the money comes out of people's superannuation savings rather than from the Government) - and will be no more successful in promoting home ownership, especially among younger people, than sixty years' worth of FHOGs costing over $40 billion (in today's dollars) have been. #auspol #housingcrisis #housingprices #homeownership #superannuation

The Federal Parliamentary Greens' Treasury spokesperson Senator Nick McKim's demand that the Government use its power (given to the Treasurer under section 11 of the Reserve Bank Act) to direct the Reserve Bank of Australia to cut interest rates, as a pre-condition for agreeing to the Government's proposed reforms to the structure of the Reserve Bank (in line with the recommendations of the 2023 Review of the RBA), illustrates precisely why the Review recommended that that power be removed - to prevent exactly that sort of political interference in the setting of monetary policy. The s. 11 power was inserted into the legislation governing the Commonwealth Bank of Australia (from which the RBA was hived off in 1959) in the 1940s by then Labor Treasurer Ben Chifley, as a reaction to the CBA's refusal to implement more stimulatory monetary policy at the height of the Great Depression. It's never been used, although as Terry McCrann reported last month, John Howard as Treasurer in the Fraser Government came very close to using it in 1982 (https://lnkd.in/g5Z67_YB). Treasurer Jim Chalmers was apparently willing to abandon the recommendation to remove this power as part of his ultimately futile negotiations with the Coalition's Shadow Treasurer, Angus Taylor, to secure bi-partisan support for the proposed reforms of the RBA - in particular, the establishment of a Monetary Policy Committee comprised of people who actually know something about monetary policy to set interest rates, as is the practice at almost every other 'developed' economy central bank in the world. But in the end, Taylor was apparently over-ruled by his Coalition colleagues who, so it's been reported, were concerned that the Government would 'stack' the proposed Monetary Policy Committee with its own sympathizers (as if a Coalition Government had never done anything similar with the RBA Board). It's incredibly arrogant of Senator McKim to assert that he - who lists his occupations prior to entering politics as "organic market gardener, shepherd, remote area mineral exploration, [and] fruit picker" followed by "wilderness guide" and "advertising and public administration" - knows more about monetary policy and how it ought to be set than the Governor or Deputy Governor or anyone else on the RBA Board. In this respect - as in some others - the Greens have something in common with Donald Trump, who thinks that he, as President, should be able to direct the US Federal Reserve as to how it sets interest rates: https://lnkd.in/ge_z4NF7. A reminder that the political spectrum is more accurately depicted as a horseshoe - with the extremes of 'left' and 'right' having much in common - than the conventional horizontal straight line. It's a worrying sign - one of a growing number- of the kind of influence that the Greens might exert should either the Labor Party or (less likely) the Coalition fail to secure a majority in the House of Representatives at next year's election.