Paul Howes, from the Australian Workers Union, has criticised the RBA for keeping interest rates too high. I have heard this criticism a few times recently – but only from those living in Melbourne or Sydney. Unfortunately, these critics need to get out more and realise that in Australia’s two-speed economy, reducing interest rates will add to inflationary pressures building in the resource states.
Monetary policy is a national instrument that is poorly suited to an economy that is being driven in two different directions by the resources boom. If the residence of new-Athens and new-Lisbon (aka Sydney and Melbourne) want government intervention, then look to fiscal policy.