Leading independent economist Saul Eslake says the RBA erred last year, leaving it catching up to deal with inflation pressures. | By Shane Wright swrighteconomy
The Reserve Bank should have started tightening monetary policy last year rather than trying to catch up with large interest rate rises in recent months, one of the nation’s leading independent economists has argued while warning federal budget repair will probably fall to taxpayers.
Independent economist Saul Eslake says the Reserve Bank was too slow to withdraw stimulus to deal with the COVID-19 pandemic.Having said as recently as November that rates were likely to remain steady until 2024, the RBA has raised rates four times since April – to 1.85 per cent from 0.1 per cent – and markets expect more increases in the coming months.
Eslake, speaking to the Economic Society of Australia, said it was clear now that central banks and governments across the world had delivered too much stimulus to deal with the COVID-19 pandemic.He said while this was understandable at the start of the pandemic, central banks including the RBA had failed in not winding back that stimulus as it became evident the economy was on the mend.