At last week’s National Cabinet meeting (August 21, 2020), the governor of the Reserve Bank of Australia continued to play a political role in the economic debate despite hiding behind the veil of ‘independence’ from such matters. A few weeks ago, the federal government claimed the state and territory governments were not doing enough by way of fiscal stimulus to reduce the job losses associated with the pandemic. The Federal government is essentially trying to force the political consequences of its own failure to increase its net spending by enough and the resulting real economic damage that has resulted onto the states and territories. The RBA governor seems to be playing along with this agenda. Last Friday, he called for the states and territories to double their fiscal stimulus outlays (by $A40 billion) and stop fussing about credit ratings. The problem is that if they did that, the conservatives would immediately start claiming the debt was unsustainable and would damage the states’ credit ratings. Just as they regularly do to advance their political agendas to cut the size of state governments. While the mainstream economists urge ‘fiscal decentralisation’ they do so because they know states are not currency issuers and will then be open to attacks about tax burdens etc, which then bias the political debate towards cutting services etc. In general, the spending responsibilities should be at the level of the currency-issuer. And, the RBA governor should get back to fulfilling the legal charter of the RBA – to ensure there is full employment and price stability. His institution is achieving neither – with negative inflation and massive labour underutilisation. If he really wanted to increase job creation he could signal that the RBA would purchase any debt issued by governments at all levels who announced, and, made operational, large scale job creation programs. That would work....Bill Mitchell – billy blog
More political interference from the central bank – oh but its independent!
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
The Rabid Right are obsessed with debt - getting other people into it and avoiding it themselves.
ReplyDeleteIt is the chosen tool of control. The staff of power of the average banker
Which is why they don't like it when you point your the National Debt is really the National Residual Balancing Figure
Former Delaware Sen. Ted Kaufman, a Biden confidant who succeeded him in the Senate, predicted during a Wall Street Journal Newsmakers Live interview Tuesday that a large increase in federal spending would be difficult to achieve in 2021.
ReplyDelete“When we get in, the pantry is going to be bare,” said Mr. Kaufman, who is leading Mr. Biden’s transition team. “When you see what Trump’s done to the deficit … forget about COVID-19, all the deficits that he built with the incredible tax cuts. So we’re going to be limited.”
Biden's cupboards are certainly bare...
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