Government won't force RBA's hand

by Adam Smith29 May 2012

An economic analyst has claimed the government's push toward a budget surplus will not necessarily move the hand of the RBA.

Speaking to Dow Jones Newswires, senior Fitch Ratings executive Art Woo said the Reserve Bank will not be moved by the government pledge to bring the budget into surplus, in spite of some government cuts which could cool down the economy.

"There's a lot of thinking that since the treasury is tightening fiscal policy and automatically if you want to get a certain growth outcome then doesn't the RBA have to cut rates? I'm not sure that's a reasonable way to view it in the sense they are an inflation targeting central bank," Woo told Dow Jones.

Woo said the RBA would still focus its attention on its inflation target band of 2-3% rather than turning its eye to stimulating economic growth.

"If inflation was still rising, or above their target then I don't think they would be cutting rates," Woo said.


  • by sidbroker 29/05/2012 1:35:12 PM

    The rates are at least 1% to high already. Is the RBA a common sense outfit or completely out of touch with reality as they take home their fat pay cheque`s each week while Australain Families are doing it tough. You only need to look at your local shopping villages and count the number of empty shops. This is the coal face of reality of how damaged our economy is and for every closed business each empty shop represents a broken family financially but hopefully not worse. WAKE up RBA.