Working Papers

RBA Governor Macfarlane’s Long View on Rates

It is unfortunate that RBA Governor Macfarlane does not speak in public more often.  He has made only seven public presentations this year, including two before the House Economics Committee.  What makes Macfarlane so interesting is his deep understanding of the importance of institutions and his broad historical perspective.  Both were in evidence in his speech to the Australian Business Economists, in which he highlighted the importance of institutional change in contributing to the resilience of the Australian economy in recent years, even going so far as to suggest that Australia served as a model in this regard (for Chile anyway!)

Being something of an economic history buff, Macfarlane produced the following chart, showing the unprecedentedly low level of nominal interest rates among the world’s major economies in recent years.  He also produces a table showing that world interest rates have been very low even in real terms.


posted on 13 December 2005 by skirchner in Economics

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Any thoughts on this comment from Macfarlane?

‘Mr Macfarlane, who steps down in September after 10 years as governor, observed that another severe recession induced by high interest rates in the US in 1981 had been viewed favourably by history.

With echoes of the former prime minister Paul Keating’s “recession we had to have”, he suggested that the 1990s recession could have been viewed as a triumph. “The episode in Australia that returned us to a low-inflation and stable-growth economy is regarded as a policy error, whereas in America it is regarded as a policy triumph,” he told an Australian Business Economists dinner.’

Source: http://smh.com.au/news/national/macfarlane-sounds-rate-rise-alarm/2005/12/13/1134236063933.html

Will history judge “the recession we had to have” as a triumph?

Posted by .(JavaScript must be enabled to view this email address)  on  12/14  at  12:45 PM

The Volcker disinflation of the early 1980s was a deliberate policy program, but it would be too generous to say this of Australian monetary policy in the late 1980s. 

Low inflation in the 1990s was a global phenomenon and the contribution of monetary policy to these outcomes in Australia and elsewhere is hotly debated among economists.  Monetary policy is thought to have made a contribution, but it is not the whole story.

Posted by skirchner  on  12/14  at  01:09 PM


You are absolutely on the money about McFarlane. You’ve pointed to a number of his speeches this year (e.g. his ‘controversial’ remarks on the Chinese and Australian experience of exchange adjustment) that are keenly observed, historically aware and well-written. I think he and Gary Banks at the PC (who I think shares McFarlane’s talents)  are ‘gems’ in the national economic policy debate.

Best wishes,


Posted by pwg  on  12/14  at  06:11 PM

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