When RBA kiss-arses like old Rossco turn, you know your central bank has lost its credibility.
With the labour market so “tight”, surely wages could take off at any moment, halting the fall in inflation – or worse, sending it back up. What’s unnerving them is an old ’70s-model NAIRU machine in the corner, with its red lights flashing and siren blaring. Panic stations. Assume the brace position.
…Trouble is, the world has changed a lot since the invention of the NAIRU machine in the 1970s. The unions used to be able to force excessive pay rises on their bosses, but globalisation, deregulation and the collapse in union membership have changed all that.
The Reserve’s boffins, however, have been so busy with their maths and modelling that they haven’t noticed how much the world has changed. They don’t even seem to have noticed that their regular forecasts of wage growth have been way too high for more than a decade.
No wonder they’re so worried. And until they get the memo, the Reserve will go on punishing everyone impertinent enough to have a mortgage.
The RBA is the paid apologist for the immigration-led, labour market growth economic model.
If it were to tell the truth about it, the model would collapse at the ballot box.
Gittins will never say so, but that’s his meaning.
