Independent economist Saul Eslake says the Reserve Bank was too slow to withdraw stimulus to deal with the COVID-19 pandemic.Credit:Louise Kennerley
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.
Housing Industry Association figures released on Thursday suggest the sharp rise in rates is starting to hit the property market,with new home sales falling 13.1 per cent in July. Sales in Queensland and NSW both fell by more than 15 per cent on their June levels.
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.
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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.
According to Eslake,the RBA’s own economic forecasts in November suggested it was time to move on from record low interest rates.
“The ‘big’ mistake was in failing to wind back the stimulus once it was clear – as it should have been by around this time last year – that governments and central banks had provided more stimulus than was needed,” he said.