the RBA has a 2.5% inflation target, and believes that there is no long run trade-off between inflation, unemployment and activitty.
the RBA has never had a 2.5% target , it didn’t when Bernie Feraser introduced inflation targeting and hasn’t had since.
what it has always had is a range which is easily explained if ever you talked to the RBA research typoes who advised on the range, names like Stevens, Edey, Battelino come to mind.
I might add inflation only rose to high levels because of two rgue CPI numbers that obviously retarded the model they used.
As Ken Henry has shown IF Commodity boom mark2 lives up to its hype NO Government can tighen enough to offset what it will do.
The point is to tighten up enough to make both the most of the boom, and also to ensure we have the fiscal space to do firm counter-cyclical policy if/when the boom ends.
It would also be nice to have enough cash socked to be sure we don’t wind up looking like Ireland if the worst really does occur.
the Ireland example is poor.
Neither the government nor the Regulators would ever make the mistake that Ireland’s lot did. We do not have the huge discrepancy between GND and GDP they have for good reason.
Nor would we be stupid enough to adopt austerity measures which gives you 5 negative quarters of GDP out of 6.
have to disagree with you on this – i agree with Stan Fisher’s conclusion … a key lesson of the crisis is “never say never”
You can agree on never say never but also agree Ireland’s troubles are highly unlikely to ever occur here as I have shown and you have ignored.
I agree it is unlikely to happen here. It was also unlikely in Ireland – according to experts like us!
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well we do have regulators with a proven record, no guarantees to shareholders and debt holders here.
We do not have the massive difference between GNP and GDP and saying it is an economic miracle.
Thus we would not have useless austerity packages making the situation worse.
actually it doesn’t matter HOW tight fiscal policy is if any country does the same thing as Ireland. The country would be completely stuffed.
Ireland is a very poor example.
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