Recent actions by the RBA do not inspire a lot of confidence in me that the RBA is “on top of it”.

Until as recently as around the middle of this year the RBA was raising interest rates and threatened more increases because of the need to “fight inflation”.  This is a most interesting proposition.

The credit crunch and general economic slowdown was well under way in the middle of the year when the RBA was threatening such increases.  Did it completely misunderstand what was happening in world markets and the impact that things would have on Australia?

The Australian economy was already slowing down significantly and there were many who warned against the RBA’s repeat interest rate rises when the Australian economy was clearly slowing down so quickly.  The property sector particularly warned against these increases in rates when activity in the property market had slowed to a virtual standstill, yet the RBA kept at it.

It seems that it is only now that the penny has finally dropped and that the RBA is making a rapid about turn and taking interest rates downwards at the most significant speed in the memory of most.

What does this all say about its handling of monetary policy and its ability to make wise decisions which have an impact on so many people?

Clearly interest rates need to get down to as low as 3% or even less to avoid a major economic catastrophe.  Why should our interest rates be sitting at 4% and 5% when the interest rates in the other major developed economies are at fractions of these amounts?

Is it time for the RBA to wake up to itself and get on with the job of doing what it is meant to do and that is keeping the economy on an even keel rather than being asleep at the wheel?

This entry was posted on Friday, November 28th, 2008 at 3:36 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.