RBA called on to fix 'diabolical' economy

by Adam Smith04 Apr 2012

The Reserve Bank has again copped criticism from the mortgage industry for failing to move on rates.

The RBA yesterday chose to leave the official cash rate untouched at 4.25%. 1300 Home Loan managing director John Kolenda has claimed the decision proves the Bank is out of touch with the needs of Australians.

"The situation out there is diabolical but it seems like the RBA has lost touch with the parts of the economy which most Australians depend on for their livelihoods and is just making monetary policy for the miners," he said.

Kolenda called on the Reserve to make deep cuts to the cash rate in light of slowing output and jobs growth.

"The RBA needs to drop interest rates immediately by at least 50bps to get this economy moving again and start creating some jobs," he said.

Next Friday will see ANZ announce its rate decision, and RateCity chief executive Damian Smith has previously predicted other banks will stay put until ANZ indicates its direction. Chan & Naylor director Ken Raiss said banks are unlikely to pass on any future RBA cuts in full, and are partly to blame for a struggling housing industry.

"Despite assertions by the big banks, they need to accept their share of responsibility for creating a sluggish housing market. Banks must align their rates official cash rates and increase availability to loans. Bank rates need to reflect the true economics of the economy," Raiss said.

Raiss also called on government intervention to stimulate slower sectors of the economy while the RBA kept demand from the mining industry in check.

"The blunt instrument of monetary policy is not being targeted enough to dampen excess demand without crucifying the slower stream in Australia’s two-speed economy," he said.

Related stories:

RBA sits tight again


  • by Paul 4/04/2012 12:28:16 PM

    Calling the situation in Australia "diabolical" is certainly a bit dramatic and reeks of the sensationalism that dominates tabloid papers. I suggest Mr. Kolenda takes a trip to Greece before thinking of the most sinister adjectives he can to generate publicity.

  • by Robbo 4/04/2012 1:08:22 PM

    I dont know what Mr Kolenda wishes to achieve by making such diabilical claims about the economy's "diabolical " condition. The RBA is no longer the only determinant for what interest rates our clients' will pay. The majors are increasingly in more control and this will continue until the govt grows a backbone or the banks cease to expect ridiculous profit growth targets every year...

  • by sidbroker 4/04/2012 2:16:35 PM

    The rates are to high guys and you should know that. Speak to people in small business and take a look around at the vacant shops and commercial premises in your area then tell me all is well!!