RBA won’t copy Europe and Canada on interest rate cuts, says deputy governor Andrew Hauser

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“It is probably fair to say that there is some secret sauce here that it is worth being particularly protective of,” says deputy governor Andrew Hauser.

became the first central banks of major economies to cut interest rates after two years of tight monetary policy.Despite market expectations that the RBA would keep the cash rate on hold at 4.35 per cent for another year, Mr Hauser said Australia was not out of sequence with the rest of the world, and central banks globally were reacting to their local economic environment.

“I think if you took those data out of Canada and you plugged them into the Australian context, you might well see a different policy stance.”Canada’s jobless rate was 6.1 per cent in March, compared with 4.1 per cent in Australia. Underlying inflation is also lower in Canada, at 2.9 per cent in April, compared with about 4 per cent in Australia.

When inflation was too high, business owners were not free to focus on core activities such as recruiting, investing and innovation, he said. “The same is true of your household. You’ve got lots of challenges in educating your children, bringing your family up, providing for them. Having something called inflation that you can’t control and which gets into every decision is incredibly toxic.”

 

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