Common Sense v Pig Headed Dogma
Not until yesterday morning did I realise the major difference between the approach to inflation control adopted in Australia and New Zealand by their respective reserve banks. The ARB excludes the price of oil from it's calculation of inflation. Hence the OCR in Australia has remained stable since March 2005. The NZRB includes the price of oil in it's inflation calculation and our OCR has gone where?
I don't know enough about these matters to understand the underlying reasons for this major difference but it is clear that we are going downhill and Australia is prospering. It is incomprehensible that when the economy starts to decline you assist it by increasing the cost of investment in growth.
No wonder the Aussies laugh at us and talk about our Reserve Bank with raised eyebrows and shaking heads.
Who sets the rules? The Gummint or the Reserve Bank? It was all very well to remove the Reserve Bank from the depradations of Muldoonist style politicians but it seems to me there is another side to the story. The Reserve Bank is not subject to being elected out of office when it screws up the economy.