The federal government would sack the RBA Board and Governor except it is too busy jumping at its own shadow

It’s Wednesday and as usual I cover a few topics briefly rather than provide a deeper analysis of a single issue. Today, I consider yesterday’s RBA monetary policy decision which held interest rates at elevated levels despite the inflation rate dropping towards the lower range of its targetting band. The RBA has lost credibility and the federal government should sack the RBA Board and Governor. The problem is that the federal government is too busy jumping at its own shadow to actually take any meaningful decisions about almost anything. I also reflect on the recent decision by the Nobel Committee to award the Peace Prize to the – Hibakusha – which reminds us of the devastation that nuclear arms can (and did) cause. Some other matters then precede today’s great music segment.

RBA continues to defy reality

As regular readers know, I am a long-term critic of the Reserve Bank of Australia’s approach to macroeconomic policy setting.

Yesterday, they didn’t disappoint me.

The Board held interest rates constant even though inflation has fallen to be well within their so-called targetting range of 2-3 per cent.

The most recent monthly indicator (released November 27, 2024) – Monthly Consumer Price Index Indicator – saw the annual inflation rate drop to 2.1 per cent in October 2024.

I analysed that data release in this blog post – Australian inflation episode well and truly over – please tell the RBA to stop trying to push unemployment up further (November 27, 2024).

The message was clear – there was no justification for holding the interest rate at its current elevated level when unemployment is rising and the non-government economy is in recession – given the inflation rate has declined substantially and the remaining drivers are not sensitive to interest rate changes anyway.

Well, the RBA disagrees and in their – Statement by the Reserve Bank Board: Monetary Policy Decision – which was released to accompany yesterday’s decision to hold the cash rate target at 4.35 per cent and the support rate on reserves (Exchange Settlement Balances) at 4.25 per cent, it claims that:

Measures of underlying inflation are around 3½ per cent, which is still some way from the 2.5 per cent midpoint of the inflation target.

Their underlying inflation measure is the so-called – trimmed mean – which “excluded the significant falls in both electricity and automotive fuel, alongside other large price rises and falls” in the latest quarterly data release (Source).

The exclusion is based on the statistician assessing “irregular or temporary price changes” and is subjective.

The exclusion, for example, of the electricity relief support provided by the Federal and State governments is not justifiable.

The high electricity prices, are mostly due to the profit gouging by the anti-competitive and privatised electricity companies that manipulate costs and supply to maximise their returns.

Why does the ABS not classify that behaviour, which escalates the CPI significantly, as being irregular when it easily concludes that when the government counteracts it to drive prices down the changes in the CPI are considered temporary or irregular.

The so-called ‘underlying inflation’ measure is thus ideological and political, yet is a convenient concept for the RBA to hide behind while screwing the low income families with debt.

Further, the RBA claimed that there were still ‘upside risks’, although they failed to justify that assessment.

Their only supporting statement was that:

… the level of aggregate demand still appears to be above the economy’s supply capacity, that gap continues to close.

That is a very curious claim when there are over 10 per cent of the available labour currently underutilised (either unemployed or underemployed) and GDP growth is at its lowest level since the massive 1991 recession.

There is thus no evidence that the supply-side of the economy (how much it can produce) has shrunk more quickly over the last few years than aggregate spending has contracted.

The RBA are simply making that up.

The Governor should be sacked and the Board reconstituted.

Except that would take some courage from the Federal government who makes those appointments and it is too scared of its own shadow to actually do very much to improve the well-being of the people in Australia.

The Hiroshima and Nagasaki atrocities remembered

The – Hiroshima and Nagasaki bombings – occurred on August 6 and 9, 1945, so the coming year is the 80th anniversary of the US aggression which “killed between 150,000 and 246,000 people, most of whom were civilians” and remains the only act of nuclear aggression in human history.

The longer term consequences of the bombings have been massive:

… many of the survivors would face leukemia, cancer, or other terrible side effects from the radiation.

We know that:

In Hiroshima and Nagasaki, most victims died without any care to ease their suffering. Some of those who entered the cities after the bombings to provide assistance also died from the radiation.

This was because the scale of the damage wiped out (killed or injured) “90 per cent of physicians and nurses” in Hiroshima.

In Kyoto, which was spared from the bombing at the last minute, there is a little memorial Chinese parasol tree planted at the – Nijō Castle – that comes from seeds that survived the bombing in Hiroshima.

You can read about that – HERE.

Each year I go to visit the castle and the trees and think about what happened and hope that humanity can rise above such atrocities, although recent events in Gaza don’t inspire much confidence.

The Japan Times article yesterday (December 10, 2024) – Nobel Peace Prize winner Nihon Hidankyo calls for a world without nukes – reported that the survivors’ group – Nihon Hidankyō (日本被団協) – were in Oslo this week, representing the – Hibakusha (the survivors of the massacre), as they accepted the – Nobel Peace Prize – for 2024.

One of the chairs of the group, “92-year-old Nagasaki survivor Terumi Tanaka” was 13 when the bombings occurred and lost several family members.

It is a good thing that the Nobel Committee is promoting an anti-nuclear message, given the current geopolitical situation.

Episode 9 of our Smith Family Manga is out this Friday, December 13, 2024

We are now deep into the Second Season of our Manga series – The Smith Family and their Adventures with Money.

The aim of the series is to a bit of fun while providing a way of learning Modern Monetary Theory (MMT).

The Smith Family ise a middle-class family living in a city somewhere in the world. The second-generation parents are university educated and have professional occupations. Their two kids attend the local public school.

In Episode 9, we find Ryan, who lost his job in the austerity-driven recession and is now in a state of depressiond as one of the long-term unemployed, reflecting on his support for Professor Noitawl’s advocacy of government cutbacks.

Further, with the recession deepening, the progressive TV station now has a new anchor – Mary Winter – who was sacked by Truth TV when she dared to challenge Professor Noitawl during a finance segment.

Mary Winter interrogates the increasingly unpopular government leader who reveals his ignorance and lack of fitness for office.

And Japanese exchange student Minako Ode learns some harsh truths from Daniel, which makes her more determined to stand up as a climate activist.

If you have any feedback we will appreciate it, other than ‘this sucks’.

ACCESS SITE

The manga is available in both English and Japanese.

Migration from Twitter to Bluesky

I have now quit Twitter (X) and am using Bluesky to post information about my work.

My Bluesky address is: @williammitchell.bsky.social

That should be easy to find.

Many Twitter followers have come across but there are still some 20 thousand to make the move.

Please help to destroy Twitter and build Bluesky into a viable platform that values open dialogue.

So please come across and continue to follow my work on Bluesky.

Music – The Saints

This is what I have been listening to while working this morning.

It is a bit of an unusual selection given my usual offerings but this was one of the early punk recordings from an Australian band – The Saints – that was one of the best exponents of that form of art.

The song – Know your product – also carries a great message.

It appeared on the 1978 album – Eternally Yours – the band’s second album.

A November 13, 2013UK Guardian reflection – The Saints: their five greatest moments – wrote:

This opened Eternally Yours and confused pretty much everyone: what the hell was a brass section doing on a punk record? The punchy horns are the perfect counterpart to Bailey’s drawled vocals and Kuepper’s buzzsaw guitar, but it did the band no favours in the increasingly rigid British punk scene. It’s also one of the greatest Australian singles ever made. Crank up the speakers before you press play: it deserves to be heard loud.

Ed Kuepper – the band’s guitarist and co-writer of the song with lead singer – Chris Bailey – told an audience once that the song had probably employed more brass players than any other song in Australian music history.

He was joking but the use of a brass section in a punk song was really innovative and the line they came up with is a brilliant example of melody and drive.

Anyway, it suits my mood today.

Turn up the volume!

And as a bonus today, here are the might oils – Midnight Oil – doing a cover of the song at the 2022 Byron Bay Bluefest.

Excellent version.

Now, some deep breathing isometric contractions to restore calm.

That is enough for today!

(c) Copyright 2024 William Mitchell. All Rights Reserved.