Only those still living in the 1970s would want the central bank to prematurely choke off wages growth when there is no cause to.
At its first meeting of the year on Tuesday, the Reserve Bank Board should ignore demands for an increase in the cash rate in 2022.
From 2015 to 2020, the Reserve Bank’s monetary policy decisions led to its preferred measure of inflation sitting beneath its 2 per cent to 3 per cent target range while full employment had not been achieved either – as evidenced by weak wages growth.Until early 2020, the Reserve Bank kept Australia’s interest rates higher than those in other advanced economies. By doing so, the bank influenced the exchange rate.
that by coming late to quantitative easing, the Reserve Bank’s policy “was contributing to a higher exchange rate, which was restraining the recovery in the Australian economy”.
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