Economists rarely agree, except when it comes to government leaving the RBA to do its job.
The Reserve Bank has been subject to an extraordinary amount of criticism lately from economists, politicians, and members of the public. TheThe recent
Economists rarely agree on anything much, but nearly all of us would say that overruling the RBA would be a mistake. Indeed, the review placed great emphasis on independence, even suggesting that this power be taken away from government. Simply put, the government should stay out of the RBA’s decisions on interest rates.
There is not even a meaningful trade-off between unemployment and inflation. Sure, we could get a temporary reduction in unemployment by allowing inflation to rise, but it would not last. As long as unemployment stays too low, inflation would keep rising. Later, we would need to have a period of higher-than-otherwise unemployment to rein inflation back in. In the long run, we do not buy lower unemployment, but we get stuck with high and unstable inflation.
Maybe there would have been better ways of slowing the economy, but none of those other options are available to the RBA. They are decisions for the government. The present government decided to take an expansionary position, choosing, for example, to subsidise energy use. You may or may not agree with these policy choices, but at the end of the day, the RBA has to pick up the slack.
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