Former CEO of the ASX, Elmer Funke Kupper , writes in the Australian Financial Review, his “Five reasons the Reserve Bank of Australia definitely shouldn’t cut rates.“
The Conservative Party agrees and is conscious that an overheated Australian economy would not be in Australia’s best interests and urges caution on reducing interest rates too far.
Mr Funke Kupper’s bottom line is that “… the Reserve Bank should be tougher and keep rates where they are. And tell us to do our jobs.”
This adds to the recent Chanticleer column, also in the Australian Financial Review, entitled “Why these fundies want companies to die” where two prominent fund managers argue that “… easy monetary policy is masking problems in the broader economy.”
The Reserve Bank needs to think very, very carefully about lowering rates further, which would:
- add to our massive, debt-fuelled housing bubble
- draw in even more marginal borrowers vulnerable to future, normalising interest rates
- mask poor business performers (through artificially low capital costs), and
- obfuscate the need for more fundamental, structural reforms (i.e. supply-side microeconomic reforms which boost capacity, productivity, investment incentives and cost-competitiveness).
