Tuesday, 2 August 2016

Monetary policy is NOT working

The RBA cut the cash rate yesterday to 1.5% , a record low.

If interest rates are at record lows the economy is not in good shape and quite obviously not in good shape.
What can the government do?

Well if the economy needs a kick and bond yields are very low then it is a no brainer. Invest in infrastructure.
There are plenty of projects that have been examined that would facilitate economic growth. I can think of three off the top of my head. complete the dual carriage way of the pacific highway.
Do the same for the great Western Highway
Ensure there is a rail line from Carlingford to Parramatta thus having a train line from Parramatta to Chatswood.

It is also obvious that only a complete moron ( hello Catallaxy) would be attempting fiscal consolidation at present. It would be counter -productive. Secular stagnation anyone.

So do it and do it now.

The Kouk weighs in sensibly