Yesterday, I pointed out that the first instalment of the rescue package could be financed by cancelling the Stage 3 income tax cuts legislated for 2024-25. Today, the same suggestion is on the front page of the SMH. Morrison is apparently resisting the idea, but that can’t last long.
Trying to keep one day ahead, I’ve turned my mind to how the Reserve Bank should operate during and after the crisis. The first step is to abandon inflation targeting once and for all. The policy of using small interest rate adjustments to keep inflation in a range of 2-3 per cent made sense in the policy context of the (spurious) Great Moderation, when the target appeared consistent with maintaining unemployment at a stable level of 5 per cent or so, assumed to be the lowest the economy couldRead More »