There is no US-style inflation here, and the neutral rate of interest is now structurally lower. That’s a chance to keep a three in front of the jobless rate.
I’ve been pretty critical of the Reserve Bank of Australia in recent years, and we shouldn’t be unduly deferential to any of our institutions. But we should also give credit where it is due.
In that spirit, RBA governor Philip Lowe’s performance at the National Press Club last week was a masterclass in clear thinking and communication. While noting that the RBA has ended its bond-buying program, he argued that keeping the cash rate at the historically low level of 10 basis points was the right thing to do for now.
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Richard Holden is scientia professor of economics at UNSW Business School. Connect with Richard on Twitter.
