Mr Keating lashed the “Reverse Bank” for not directly financing government expenditure through direct bond purchases, calling its board “the high priests of the incremental” and accusing them of abandoning their mandate of full employment.
“The problem about central banks — and this is true of the Reserve Bank of Australia — is that it has become a sort of deity, where lesser mortals might inquire, however respectfully, what the exalted priests might be thinking or have in mind for their prosperity or the country at large,” Mr Keating said in a letter distributed to media.
But Treasurer Josh Frydenberg has slammed the attacks as “nasty, vindictive, unnecessary, misguided” and said the government would always respect the RBA’s independence.
“The RBA has done very well through this crisis,” Mr Frydenberg told media.
“Unlike other crises, they didn’t have room to move on monetary policy … because the cash rate was already low during this crisis it could only come by down by 50 basis points. But what the Reserve Bank did was they pumped liquidity into the banking system to stabilise it, which was good news for customers, and they purchased government bonds on the secondary market, some $60 billion worth of government bonds.”
Mr Frydenberg suggested that Mr Keating was upset by RBA governor Philip Lowe’s claim that the legislated superannuation increase to 12 per cent would hit wage growth in the middle of Australia’s biggest recession in 100 years.
“Why did he make the comments just two weeks after the Reserve Bank had made some comments about the superannuation guarantee and the trade-off between wages and that increase?” Mr Frydenberg said.
“Many people are left wondering what Paul Keating’s motives behind this nasty, unnecessary attack are. We as a government value the independence of the Reserve Bank when it come to monetary policy … he shouldn’t be attacking the bank like he has.”
The RBA already funds government spending – pointless debate – where else does the Australian dollar come from? Fiscal policies can only be enacted by the government and the treasury co-ordinates with the RBA to provide reserves through some key strokes on the computer. What more is there to understand?
Keating that would be called monetizing the debt and the consequences are severe maybe go study advanced monetary economics and you could understand the consequences of what you are proposing you moron
Placido Domingo must needs sing from time to time or he’ll lose his voice completely!!
Keating should gracefully retire and I will never forget how he allowed interest rates to go up to almost 20% which created so much hardship for my parents at the time. they struggled to keep their business and pay the mortgage. My parents may have forgiven but I haven’t.
seem to forget the reason why you have a job is because of the polcies of PJK. How we forget the hand that feeds us. Interest rates are two fold – they impact borrowers and investors. Borrowers need to understand the AMOUNT borrowed and servicibility has implications both when interest rates are low and HIGH. Those getting 17% on TD and those who rode the bond market down to now .88% have down very well !!! Looking ahead I cant see that will happens for Borrowers or Investors. Disaster on all fronts of whoses making……..
Knowing how the money system works, we had recommended clients on lifetime annuities at rates of 9% about a decade ago and we (including clients) have been laughing ever since.
Oh dear. Its Karate Kid time.
Retired politicians should be exactly that, retired. Ex-PM or not, he can keep his biased views and the media should reat him for exactly what he is; simply another plain citizen that has no place commenting on areas he no longer is attune to.
Totally agree. Same goes for Turnbull, Abbott & Rudd. Thankfully Gillard and Howard seem to have the good grace to stay out of politics after their time has passed.