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RBA money printer didn’t go brrrr

I’m in USSC’s The45th explaining why the RBA’s money printer didn’t go brrrr.

posted on 25 March 2020 by skirchner in Monetary Policy

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Policy Forum: Macroeconomic Issues in a Changing World

The March 2020 issue of the Australian Economic Review is out, with a Policy Forum including my article on The Effect of Changes in Monetary Policy on Consumer and Business Confidence. Be sure to also read Bruce Preston’s article in the same issue on The Case for Reform of the Reserve Bank of Australia Policy and Communication Strategy. There is a CAMA Working Paper version of Bruce’s article for those without access to the journal.

I’m pleased my paper contributed to the RBA walking back the contention in the November Board minutes that rate cuts hurt confidence. The draft paper was circulated within the Bank by John Simon, which was fitting given that it was essentially an update of his 2001 RBA RDP on the determinants of sentiment. John’s 2001 results hold-up quite well. Bruce’s paper also discusses why the contention in the November Board minutes is incoherent from a strategy and comms perspective.

The final capitulation came when Governor Lowe explicitly rejected the idea that rate cuts hurt confidence in testimony before the House Economics Committee, responding to some very effective questioning by Andrew Leigh.

posted on 28 February 2020 by skirchner in Monetary Policy

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RBA’s foot-dragging leaves economy dangerously exposed

I have an op-ed in the AFR on the lessons from the US experience with monetary policy for the RBA in the wake of yesterday’s official interest rate decision.

posted on 05 February 2020 by skirchner in Monetary Policy

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The evidence suggests Reserve Bank rate cuts don’t hurt confidence

In The Conversation, I round-up the US and Australian evidence on the effect of monetary policy on consumer confidence. There is little evidence for a perverse signalling effect from rate cuts on confidence, contrary to suggestions by the RBA Board.

posted on 04 February 2020 by skirchner in Monetary Policy

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The Effect of Monetary Policy on Consumer and Business Confidence

I have an article forthcoming in the March issue of the Australian Economic Review examining the US and Australian evidence on the effect of monetary policy on consumer and business confidence. It has been suggested that recent reductions in official interest rates might have a perverse signalling effect on consumer and business confidence. But that is not what the US and Australian evidence or my own estimates suggest. While consumers talk their book in relation to expectations for their own finances, when it comes to expectations for the economy as a whole, consumers and business are for the most part clear about rate cuts being expansionary for the economy.

As noted in the article, even if rates cuts did have a perverse signalling effect on confidence, this would not be an argument against monetary easing. It implies that the Reserve Bank should not act on its assessment of the economy, which is likely to be self-defeating.

Shane Wright writes up the paper for the SMH/Age in the context of the January consumer confidence release.

posted on 24 January 2020 by skirchner in Monetary Policy

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Now we know. Phil Lowe’s speech on QE

I have a piece in The Conversation on what we learned from Governor Lowe’s speech last night about its prospective approach to QE. As I note in the article, the risk now is that the RBA repeats the US Fed’s mistakes by moving too slowly.

posted on 27 November 2019 by skirchner in Monetary Policy

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The Treasurer should not let the RBA off the hook so easily

I have an op-ed in the AFR arguing that the Treasurer’s decision to leave its agreement with the RBA unchanged is a missed opportunity to hold the RBA accountable for its recent underperformance against mandate.


Robert Guy has a related piece in the same edition. The headline says it all.


The Treasurer just backed the RBA over what the market is telling us. We will see how that turns out.

continue reading

posted on 06 November 2019 by skirchner in Monetary Policy

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What is really driving monetary policy?

I get a mention in this insightful column by Parnell McGuinness noting that the debate over monetary policy is really about the allocation of responsibility for macroeconomic policy. RBA needs to step-up, not deflect.

posted on 16 October 2019 by skirchner in Monetary Policy

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Fiscal stimulus and open economy crowding-out

I’m quoted in this AFR story on the open economy crowing-out effects via the exchange rate and net exports that could be expected from a discretionary fiscal stimulus.

I make the case in more detail in this 2013 op-ed marking the 30th anniversary of the float Australian dollar.

posted on 12 October 2019 by skirchner in Fiscal Policy, Monetary Policy

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When interest rates approach zero, the RBA must rethink monetary policy

My explainer for the ABC Online on the RBA’s policy options as interest rates approach zero.

posted on 08 October 2019 by skirchner in Economics, Monetary Policy

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Australia’s slowing economy: how should the government and Reserve Bank respond?

Brendan Coates, Emma Dawson and I go head to head in the Guardian Australia over how the government and RBA should respond to an emerging downturn

posted on 21 September 2019 by skirchner in Economics, Fiscal Policy, Monetary Policy

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Australian Business Economists Event on QE

Australian Business Economists hosted a Lunchtime Briefing on QE in Australia? What would it look like? with Ms Lyn Cobley, Chief Executive, Westpac Insitutional Bank, Dr Stephen Grenville AO, Non-resident Fellow, Lowy Institute, and myself.

Ross Gittins summarises the event in his write-up for the SMH.

The text of my remarks can be found here.

posted on 26 August 2019 by skirchner in Economics, Monetary Policy

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Lessons from quantitative easing in the United States: A guide for Australian policymakers

I have a new report out with the United States Studies Centre on Lessons from Quantitative Easing in the United States: A Guide for Australian Policymakers. It argues that the RBA could implement a smaller but more effective program of asset purchases by learning from the US Fed’s missteps.

There is a write up by John Kehoe in the AFR. There is also an op-ed version in The Conversation.

In this piece in The Mandarin, I explain why Tim Wilson MP and others are mistaken in their criticisms of QE. Opposing QE when it is needed will lead to more of the interventions Tim otherwise opposes.

Bloomberg’s Michael Heath also quotes from my report.

posted on 18 June 2019 by skirchner in Economics, Monetary Policy

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US Fed Shows the RBA is Not About to ‘Run out of Ammunition’

I have a piece in the USSC’s 45th on how the Federal Reserve shows that the RBA cannot ‘run out of ammunition’ and why the RBA is singularly responsible for managing aggregate demand.

posted on 06 June 2019 by skirchner in Monetary Policy

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New government should put Phil Lowe on the hook for inflation

I have an article in The Mandarin on why the next government should re-negotiate the current agreement between the Treasurer and Reserve Bank Governor on the conduct of monetary policy.

posted on 09 May 2019 by skirchner in Monetary Policy

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