The dire picture of the Australian economy provided by this week’s national accounts produces a conundrum. If the economy is so weak, why are interest rates so high?
In other developed economies, central banks have started cutting or, in the US, are about to start cutting policy rates that surged to decades highs in response to the post-pandemic global outbreaks of inflation.
The European Central Bank, the Bank of England, the Bank of Canada and even the Reserve Bank of New Zealand have already reduced their equivalents of the Reserve Bank’s cash rate. The US Federal Reserve Board is expected to make the first of a series of cuts later this month.
Reserve Bank governor Michele Bullock has a dilemma.Credit: Alex Ellinghausen
Yet our cash rate is stuck at 4.35 per cent, its highest level since the lead-up …