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

[NadiaWits]

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

Greg Jericho asks three experts what should be done to save the country from recessionWith the unemployment rate rising from 5.0% at the start of the year to 5.3% in August, and the latest GDP figures showing slow growth and the economy going backwards when accounting for population increase, talk is very quickly turning to what can be (or should) be done.There are two policy arms of the economy – fiscal and monetary. The government controls the fiscal side through spending and taxes; the Reserve Bank controls the monetary side.By choosing to undershoot the inflation target, the RBA has damaged the credibility not just of the target, but monetary policy itself Related: The global economy is slowing down. What can governments do about it? Reinstate the Labor party’s 2010 agreement that subordinated the financial stability objective to the inflation target;Have Lowe front a press conference after each CPI release to explain the outcome and underscore the RBA’s ownership of inflation;Make Lowe’s reappointment conditional on inflation averaging between 2-3% over the remainder of his term.It’s not a lack of ammunition that’s holding the RBA back, but an unwillingness to use that ammunition Related: A decade after Lehman fell, the global economy is not better. It’s worse Immediately increase the rate of Newstart by at least $75 per week;Bring forward stage two of the tax cuts legislated in July;Legislate to reverse the cuts to penalty rates across all awards;Abolish the cap on APS salaries and provide pay rises of at least 3% to federal employees.The RBA should transition to QE as soon as the level of the cash rate becomes a constraint on its ability to meet its mandate Related: Wealth inequality is soaring – here are the 10 reasons why it’s happening | Dominic Frisby  Related: Test of nerve for markets as 10 years of cheap money come to an end There is still much more the Reserve Bank could do to improve transparency and accountability Continue reading...

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