Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.

 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate


On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.


RSS 2.0

Reserve Bank will likely defer needed cut

By Henry Thornton - posted Tuesday, 7 April 2009

With a worsening global economy and rising unemployment here, the Reserve Bank should cut interest rates by a further 50 basis points today.

However, "well-connected" commentators say the Reserve will sit pat for another month, so Henry's wish may not be achieved.

The global news includes some cheer.


In many places the message is that the rate of decline seems to be slowing.

More importantly, the leaders of the G20 nations have met in London and reached some sort of accord.

The G20 leaders released a "six-point plan". This includes tighter controls on an extended number of financial institutions, including hedge funds, a common global approach to dealing with toxic assets, a $US1.1 trillion ($1.53 million) package (doled out via a strengthened IMF) to supplement the $US5 trillion stimulus to the global economy by individual countries; $US200 billion of trade finance over the next two years to help reverse the steepest decline in world trade since 1945; more power to developing nations within international agencies including the IMF and OECD; and a pledge that the fiscal stimulus, including the sale of gold by the IMF due to raise $US6 billion, will help the poorest nations and create green jobs.

The idea of a global super-regulator of all significant financial institutions, including hedge funds, fills Henry with apprehension. So too does the apparent evolution of the IMF as a global central bank and the OECD as some sort of global Treasury.

The details of how to deal with "toxic assets" were not spelled out, so one presumes there will be some version of the American plan, which itself is not certain to work well, if at all.

All the standard objections to fiscal stimulus of demand apply - negative effects on confidence, minimisation of stimulus to the extent that handouts are saved rather than spent, "crowding out" of private spending as recovery builds and indeed the strong inflationary risks due to the inability of these crypto-global agencies' to withdraw stimulus as recovery builds.


Still, the immediate effect was positive for confidence, as shown by the rise of global equities as the G20 met.

Locally, there have been several bits of news that, together, make a case for further easing.

Most importantly, the real rate of unemployment is moving sharply upward.

  1. Pages:
  2. Page 1
  3. 2
  4. 3
  5. All

Previously published in The Australian April 7, 2009

Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

3 posts so far.

Share this:
reddit this reddit thisbookmark with Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Henry Thornton (1760-1815) was a banker, M.P., Philanthropist, and a leading figure in the influential group of Evangelicals that was known as the Clapham set. His column is provided by the writers at

Other articles by this Author

All articles by Henry Thornton

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Henry Thornton
Article Tools
Comment 3 comments
Print Printable version
Subscribe Subscribe
Email Email a friend

About Us Search Discuss Feedback Legals Privacy