Kochie slams RBA as too slow in responding to economic downturn

The Reserve Bank has come under fire from Channel 7 Sunrise host David Koch for not taking swifter action in response to the current challenging market conditions and plans by the federal government to deliver a surplus in the May budget.

“I’ve been a big fan of the Reserve Bank and the way it handled the global finance crisis.

“But I’m concerned the RBA board has been too slow in responding to the recent downturn,” says Koch in his latest blog post, written before the latest RBA minutes were released.

“If the federal budget is contractionary then interest rate settings have to be expansive to compensate.

“And they have to move quickly and decisively,” he says.

Koch has criticised the RBA despite naming Stevens as one of his “idols” in a list that includes Meriton boss Harry Triguboff, rap star Nelly and his own father.

Koch even includes a photo of himself smiling alongside a typically dour-faced Stevens, whom he describes as the “perfect type of person” to lead the central bank.

“The self-proclaimed ‘most boring person in Australia’, [Glenn Stevens] is the ultimate finance nerd. A man with immense intellect, he lives and breathes the job but is very conscious of the responsibility the role brings,” writes Koch on kochie.com.au.

According to Koch, the RBA cannot afford to be slow to react when the federal government is looking to cut spending in the next budget.

“The next six months could be a dangerous time for the economy and the financial health of Australians.

“Because if the federal government and the Reserve Bank don’t get it right, it could prove to be tipping point for the economy to slide in to a recession,” he says.

Kochie warns that there are signs that the resources boom is slowing (two consecutive months of trade deficits) and it “may not be able to offset the sluggishness of the lower speed sectors of the economy”.

Furthermore, he says, “consumers continue to borrow and spend less but save more as they continue to stay in the bunker”.

Figures released by the ABS today show that total lending finance fell by 6.5% in February meaning total lending commitments are up just 0.9% on a year ago after being up 3.5% in January.

According to CommSec economist Savanth Sebastian, the slump in lending seems to be gathering momentum.

“On a trend (smoothed) measure, the pace of lending has now fallen for five consecutive months with the 1.7% slide in February marking the biggest monthly fall since mid-2008 – a period that was at the height of the global financial crisis,” he says.

Sebastian says lending finance figures are a forward indicator of spending further down the track with the current lack of lending “clearly a dampener on future activity”.

 

 

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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