By recommending a far-reaching review of monetary policy,the OECD is telling the federal government and this country’s economic policy hardheads it’s time for a bit of self-reflection.
While the treasurer and government of the day like to claim credit for the nation’s economic outcomes,much of the weight is actually borne by the RBA,its board and its governor.
By setting the official cash rate,the RBA plays a pivotal role in the life of almost every Australian. From the monthly mortgage bill to the chance of getting a job,to the cash we pay for a cup of coffee,the Reserve is ever-present.
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At its heart is the bank’s charter,which requires the RBA to maintain the stability of the currency and deliver full employment to ensure the economic prosperity and welfare of all Australians. It does this primarily by trying to keep inflation between 2 and 3 per cent.
But that’s a target it has failed to meet for the past five years. The cost of that failure can be measured in an unemployment rate higher than it needed to be,lower wages for workers and poorer outcomes for businesses.
On the RBA’s watch,wages growth slowed to record lows (even before the coronavirus pandemic),household debt has increased to record levels,productivity has fallen to a 60-year low and house prices have soared.