Once again the market lifted the dollar higher following the RBA rate cut, 14:30 yesterday.
The local action was swamped by US economic news which saw the USD fall against most currencies. Take that into account and the limited pass through of the rate cut to borrowers, and we can conclude the RBA strategy is shot.
On an international basis, the economy here is still quite strong (and much stronger than many others). It is time for economists to stop calling for ever more cuts, when it clearly won’t work. Time for some fresh thinking. Lets ask what will it take to switch lending to business, and get real economic momentum going, rather than more housing loans. Simply cutting rates ain’t working. And we deplete ammunition in the locker should we have a real economic crisis.
Come on RBA, look harder at macroprudential alternatives. Be more creative.
