The RBA Governor has today admitted under vigorous questioning by Senator Malcolm Roberts that the sheer volume of money spent during the last 3 years of reckless government intervention has driven our current inflationary problems.
In the exchange, Dr. Lowe was asked about the unexpected rise in inflation, which reached a 30-year high of 7.8% in the December quarter. During the ABA Australian banking association conference that both he and I attended, Dr. Lowe predicted that inflation would peak at 4.2% in March '22.
We asked why Dr. Lowe was surprised by the inflation when several individuals, including myself, had previously warned the Reserve Bank and the government about the possible significant inflation that could arise due to the sheer volume of money being splashed around the economy.
Dr. Lowe responded that although the expansion of the money supply, low-interest rates, and government support during the pandemic has contributed to inflation, the entire story is not complete as at least half or even three-quarters of the increase in inflation is due to what went on in Europe and the supply-side disruptions.
That might be where the ‘meeting of the minds’ between One Nation and Governor Lowe departs. His concession at Senate Estimates is a start in the long process of accountability for Australia’s rapidly deteriorating economy.
What every reasonable Australian accepts is that, to quote Governor Lowe, “The expansion of money supply, low-interest rates and government support during the pandemic has driven inflation”.
Governor Lowe was then asked if the public was paying the price for the Reserve Bank's support of the government's wasteful management of COVID using lockdowns and other restrictions, which necessitated the money creation.
Dr. Lowe clarified that the Reserve Bank did not create money at the government's request. Hard to accept, but that was his response. However, the Governor admitted, in terms, that while it wasn’t directed he print money the cash creation was in response to the government’s actions during the early stages of COVID management of destroying our economy, closing the borders and shutting down businesses. If the economy wasn’t in the drain because Scomo & Co told us we had to hide in the cupboard then RBA wouldn’t have printed. A startling admission indeed.
The board of the Reserve Bank consisting of nine individuals decided to create money, he informed the committee, and they had meetings with the government. Most Australians would be shocked if at those meetings the government didn’t pressure the bank to print money, but that fight for accountability remains ongoing.
If you are sceptical of Governor Lowe’s reliability on economic management, your concern may be well placed. Let’s not forget his promise that rates would stay low until 2024 and while it may have been foreseeable, the fact is Australians who relied on the Governor’s promise will likely go broke because they relied on his advice.
One Nation will not rest until every detail of this sticky, shocking mess is unraveled.