Halt to monetary stimulus welcomed

National welcomes the Reserve Bank’s announcement that it will reduce the level of monetary stimulus, and it comes none too soon, National’s Shadow Treasurer Andrew Bayly says.

“This doesn’t come as a surprise given the overwhelming evidence that the economy is heating up too much too quickly.

“While a low Official Cash Rate and the Large Scale Asset Purchase Programmes were seen at the start of 2020 as an important way of supporting the economy during the pandemic, they have done their job and it’s time to put monetary policy back on normal footing.

“They might have been useful when there was a lot of uncertainty with the economic impact of Covid-19, but they have also helped fuel rising house prices and consumer-driven inflationary pressures.

“ANZ’s latest house price analysis shows annual house price inflation is running at 28.8 per cent, confirmation that the Government’s attempts to dampen demand aren’t working.

“The taxpayer has to indemnify the Reserve Bank for any losses it makes on its purchase of government bonds – and so far the Government has appropriated $3 billion for it. Any losses from the programme is effectively a transfer from taxpayer funds to the institutional investors from whom the Reserve Bank bought government bonds. 

“While there is a role for this sort of thing to help offset an economic shock, it’s not what we want to keep doing longer than is necessary.

“The poor take-up of the Reserve Bank’s ‘Funding for Lending Programme’ to date, where only $3.5 billion out of $28 billion has been used, indicates the financial system is awash with cheap money and really doesn’t need any more.

“We now need to see the Government to stop leaning on the Reserve Bank to stimulate the economy and to focus on supporting businesses so they are prepared to invest and take on new staff.”