Josie v Money Matters listener - understanding economics
October 24, 2008 by Josie Kay · Leave a Comment
Q. I was listening to your program on GoldFM last Sunday morning. I found it amazing the number of incorrect economic statements that were made concerning the federal governments “stimulus”package.
The bottom line is that the so called stimulus will have no impact as it is based on the mistaken belief that consumer spending drives the economy, when in fact business spending is the driver.
Any surplus is held by the Reserve Bank, and is still part of the money supply, so that it is money created out of thin air (as central banks have an addiction to which is one of the causes of inflation), but a draw down in money balances (often erroneously referred to as idle balances). Read more
Taming the Inflation Dragon and Understanding why the Reserve Bank must increase Interest Rates
March 10, 2008 by Josie Kay · 9 Comments
Don’t worry, I am not about to give you a lesson in economics. I am asked this question quite often and thought I would try and address it as simply as possible.
I can totally understand why most people are baffled as to why the Federal Reserve Bank of Australia raises interest rates when many home owners are struggling to pay the mortgage, have high petrol bills and groceries seem to be getting a lot more expensive.
Why do they have to inflict more pain? One reason is that the Reserve Bank’ is very concerned that inflation is above their target band of 2-3%pa. The latest inflation figure released revealed that the underlying inflation rate was 3.6%pa which was a shocker. The experts are saying that interest rates will have to rise again in March.
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