NEWS - Politics & IR

2 Comments

Reserve Bank of Australia board member Warrick McKibbin has called on the federal government to tighten its economic policy in order to rein in the effects of the country's commodities boom, according to Dow Jones newswire.

"There needs to be policy to deal with the strong demand that we are observing," Mr McKibbin said.

The federal government has not yet created "any of the fiscal policies that we require, and I am hoping that will be addressed very soon," he said.

Debt problems in Europe were not expected to have a flow-on effect into Asian or US economies, Mr McKibbin added, according to Dow Jones.

On Tuesday, the Reserve Bank left the official cash rate unchanged for a second consecutive month at 4.5 per cent.

|  

---

Related Industry Sectors

View the latest stories on Politics & IR

View the latest stories on Economy

Related People

View all stories on WARRICK MCKIBBIN

---

2 Comments

Charlie Wilkie wrote:

I'd be interested to know what Warrick McKibbin's suggestion for dealing with demand is.

(See Govt must rein in demand growth: McKibbin, July 8)

Maybe we could request China to slow demand or stretch its demand over decades instead of years. Or why not make hay while the sun shines over China. Maybe the Reserve Bank is becoming uncomfortable with having to use interest rates as the ineffective tool it is. Its such a ridiculous notion to use interest rates to slow our economy when the demand is coming from an external source.

8 Jul 2010 9:21 AM

Ben O'Grady wrote:

The solution has been found in other countries having a resource boom.

(See Govt must rein in demand growth: McKibbin , July 8)

Create a sovereign wealth fund that takes the trade surplus and invests offshore where it will not increase demand and inflation in Australia. Interest rates can then be kept low while the government still increases its fiscal surplus, ready for the next time Keynesian stimulus is required to increase aggregate demand in a recession. Unfortunately Labor would not be able to then use this surplus to buy votes as it is today requiring the Reserve Bank to have to raise interest rates, hurting the most vulnerable in society for whom Labor supposedly is meant to represent and protect. I wonder if Labor is economically incompetent or simply power-hungry and short sighted?

8 Jul 2010 4:01 PM

Contribute to the Conversation

To contribute your comments for possible publication, please Login or Register.

Preference will be given to succinct contributions. We may contact you via email prior to publication.