‘Dangerous game’: Andrew Hauser warns RBA watchers to pull their heads in
Reserve Bank deputy boss Andrew Hauser has warned economists to rein in their overconfidence, just days after markets were caught wrong-footed about last week’s interest rates decision.
The RBA held rates last Tuesday and signalled there would likely be no cuts this year, despite a flood of commentators backing in an easing move in 2024.
It followed a rollercoaster few weeks, after earlier high monthly inflation data raised the alarm about a potential hike.
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“When the stakes are so high, claiming supreme confidence or certainty over what is an intrinsically uncertain and ambiguous outlook is a dangerous game,” he told the Economic Society of Australia’s Queensland branch on Monday.
“At best, it needlessly weaponises an important but difficult process of discovery.
“At worst, it risks driving poor analysis and decision-making that could harm the welfare of all Australians.”
He added: “Beware anyone who claims it is obvious what to do – for they are false prophets.”
Plenty of big banks have consistently underestimated just how high the RBA would be willing to go on interest rates in the fight against inflation. That has potentially influenced the decisions of borrowers.
The RBA has also been forced to push back forecasts on the timeline for inflation returning to target.
But Mr Hauser said the central bank’s decisions were not dependent on those projections.
He said the key reason inflation had overshot RBA forecasts may have been weak supply growth — contrasting with widespread commentary in recent days about strong demand.
The central bank’s most recent statement of monetary policy now factored in weaker supply and a tighter labour market than previously expected.
“(T)hat extra weakness is assumed to persist, pushing up a little on the outlook for inflation,” Mr Hauser said.
That follows widespread reporting that the RBA and Federal Government were at odds about the impact of rocketing public spending on inflation.
The RBA has been far more measured, however, repeatedly batting away questions on a split.
