Comments on Robert Gottliebsen “Don't
bank on mortgage rate cuts”, 27/01/2012,
http://www.businessspectator.com.au/bs.nsf/Article/Interest-rates-deposits-RBA-house-prices-Mike-Hirs-pd20120127-QVQZQ?OpenDocument
Thus reflects an anomaly with the
Australian money markets or at least in the effectiveness of RBA
monetary policy.
The RBA should do what the Fed has been
doing recently, that is, to allow at least the four major banks to
borrow from it with their high quality mortgage backed securities to
make the RBA interest rate a really market rate that banks can
borrow.
This may include a revised definition
of deposits of banking institutions with the RBA, that is, the
reserve ratio to facilitate this, but still retain effective control
and effectiveness of monetary policy. So how high quality mortgage
backed security is accounted in such new definition may need some
thinking.
RBA officials need to consider this move to improve the Australian money market in terms of effectiveness. Arguably, Australian real effective interest rates can be lowered and hence welfare can be enhanced. This can be reasoned from the borrowing costs (the interest paid for borrowing at the international markets be our banks for example) that could be paid to the RBA so would be part of gain by Australians!
RBA should reflect why it has not done this earlier.
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