If the Reserve Bank were a football coach, it would have been sacked eons ago.

The bank’s job is to hold inflation between 2 and 3 per cent. Since mid-2014, it has hit that mark on just four occasions. There are all sorts of reasons for this failure – the pandemic being just one of many – but by any stretch, having inflation in the band for just 10 per cent of the past decade is pretty poor form.

That track record is one of the reasons why recent commentary out of the bank repeatedly notes the RBA “remains resolute in its determination to return inflation to target”. Having failed for so long, it wants to prove to financial markets, investors and consumers that, sometime soon, it will get inflation in that 2-3 per cent sweet spot.

Some of its core beliefs were shredded in the pre-pandemic era as it sought to lift inflation to its target. There is now a danger more of those core beliefs could be challenged as it seeks to bring inflation down.

Thursday’s job figures confirmed the nation’s employment market, outwardly, remains extremely strong. Almost 7000 jobs disappeared in March, but that was after a super-strong 117,000 were created in February.

On the trend measure, unemployment remained at 3.9 per cent where it has been since November. Despite the RBA’s tightening of monetary policy, the trend jobless rate has climbed by just 0.3 of a percentage point over the past 12 months.

Total employment has climbed by 337,000 which, historically, is a stellar performance.

Yet, and this is the issue that has to be playing on the mind of the Reserve Bank, the inflation rate has fallen.

QOSHE - If the Reserve Bank were a football coach, it would have been sacked eons ago - Shane Wright
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If the Reserve Bank were a football coach, it would have been sacked eons ago

6 1
18.04.2024

If the Reserve Bank were a football coach, it would have been sacked eons ago.

The bank’s job is to hold inflation between 2 and 3 per cent. Since mid-2014, it has hit that mark on just four occasions. There are all sorts of reasons for this failure – the pandemic being just one of many – but by any stretch, having inflation in the band for just 10 per cent of the past decade is pretty poor........

© The Sydney Morning Herald


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