Better mix of macroeconomic policies needed

Comments on Bill Evans “WEEKEND ECONOMIST: Racing to a rate cut”, 29/10/2011, http://www.businessspectator.com.au/bs.nsf/Article/Reserve-Bank-November-Meeting-rate-cut-25-bps-pd20111028-N39US?OpenDocument&src=rot

It is interesting that both official and market interest rates in Australia are much much higher than in most advanced economies.

While one might argue that our economy is also much better than theirs, simply doing it masks a difficult policy questions. That question is: how can monetary and fiscal policies be more closely coordinated, as generally implied in economics textbooks, to achieve better and most desirable results.

I think fiscal policy should do much more to encourage people to work in regions and areas where labour shortage are the most severe, such as the fast lane areas of the so called 2 speed economy.

Taxation policy should be adjusted to do the job to give people more incentives to work in those region and areas.

Fiscal policy can be more flexible to target regions and industries sectors, while leaving the monetary policy to accommodate the whole economy.

I think there is a need to establish a national economic policy commission, so it can recommend to the government and the RBA on the best mix of the monetary and fiscal policies to achieve the best national outcomes and to benefit the consumers more, such as lower interest burdens on mortgages and other borrowings.