Philosophical Conversations Public Opinion Junk for code
parliament house.gif
Think Tanks
Oz Blogs
Economic Blogs
Foreign Policy Blogs
International Blogs
Media Blogs
South Australian Weblogs
Economic Resources
Environment Links
Political Resources
South Australian Links
"...public opinion deserves to be respected as well as despised" G.W.F. Hegel, 'Philosophy of Right'

The Financial Review and the Governor « Previous | |Next »
February 28, 2005

I read today's Australian Financial Review editorial on the Reserve Bank (RBA) and Ian MacFarlane, its current Chairman. The occasion is the RBA's forthcoming decision to raise or not to raise interest rates by a small percentage.

The Review is positively fauning towards the Governor. Here is part of the Review's editorial:

The RBA should not be panicked into a premature rare rise But Mr Macfarlane's record is so good because he has been prepared to on occasion to make unpopular, pre-emptive rate increases to avoid worse latter. The issue furrowing his brow now is that the supply-side constraints have put the speed limits back on the economy, more than a decade after we have shrugged them off with bold market-opening reforms.

The man is a guru, an delphic oracle of wisdom on how to sustain prosperity.

The AFR says that the long expansion has left our economy running at or near full capacity. So until the supply side reforms go through it is necessary to peg growth to sustainable levels. But don't worry, the Governor has seen the inflationary pressures coming as demand outstrips supply, and he has his hand firmly on the monetary levers.

Now, I'm not arguing against the pulling the monetary policy lever. I just note the narrrowness of the economic policy. It's just a matter of turning down the heat under the economic pot on the stove a tad. A bit of delicate technique is all that is required. The assumption is that the economic fundamentals are right.

Are they?

Nothing is mentioned about an ecologically sustainable economy; nor about the need to re-regulate the market to ensure efficiency and competition. Nothing about the importance of knowledge and research and development for national development. There is nothing about the failure of micro-economic reform to establish competitive markets or about the need to ensure that gains and pains of necessary adjustments are fairly shared.

And suprise suprise. There is a big silence about the current account deficit.

Nor is any of this mentioned in the feature article by David Bassnese in the AFR (subscription only) about 'leading economists questioning the wisdom of raising interest rates now.' That is a very narrow perspective. What has happened to the critical economic commentary in the AFR?

| Posted by Gary Sauer-Thompson at 2:37 PM | | Comments (0)