Should the cash rate have been cut on Tuesday?

Blog Post 6 | 9^th April 2015

Should the cash rate have been cut on Tuesday?

Callam Pickering from Business Spectator wrote a great follow up piece to the absence of a cash rate cut on Tuesday entitled Has monetary policy failed Australia’s economy? The article raised the question ‘What’s the counterfactual?’ … i.e. ‘Based on the historical relationship between interest rates and growth, there is a non-trivial possibility that if the cash rate was at, say, 3.5 or 4 per cent, then the Australian economy would either be in a recession or well on its way to one.’ Callam raises a very interesting point of the consequences of not cutting the cash rate in time before it causes adversity to economic growth and conditions, and having formerly worked for the Reserve Bank of Australia his opinion is one of validity.