Perspective: RBA's Lowe should rescue a PM lost in the Canberra bubble | 1rossgittins
Dr Philip Lowe, governor of the Reserve Bank, is one of the smartest economists in the land. You don’t get a PhD from the Massachusetts Institute of Technology unless you’re super-sharp. But the question now is whether he has the courage to stand up to a wilful Prime Minister whose confidence far exceeds his comprehension.
Does Lowe stand back and watch an overconfident leader dice with political death by pretending that monetary policy hasn’t reached the end of its useful life? Conventional monetary policy has lost most of its power because household debt is at record levels, because the official interest rate is almost at zero, and because rates are already so low that another few cuts won’t make much difference.last week, there’s little to be gained from deciding to progress to QE – "quantitative easing". It’s not capable of lowering rates much further and, in any case, comes at a cost.
In his speech outlining the "limitations of monetary policy" and his lack of enthusiasm for unconventional measures, Lowe noted that their modest benefits needed to be balanced against their possible adverse side-effects.
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