Profit-price spiral: the truth behind Australia’s inflation
The focus in current anti-inflation policy on suppressing wage growth, enforcing a permanent reduction in real wages, while ignoring the role of record profits in driving post-pandemic inflation reflects an ahistorical and ideological approach to macroeconomic management, writes Jim Stanford.
The consequences of low interest rates for the Australian banking sector
There is a vast international literature exploring the consequences of low interest rates for various banking sectors. In this paper, the author explores how this international literature relates to the Australian banking sector, which operates differently to other jurisdictions.
The return of inflation: what it means for Australia
Inflation is rising around the world, the sting in the tail of the pandemic economic stimulus packages unleashed by governments in 2020. This analysis paper examines the implications for prices and wages growth in Australia.
Of interest? Estimating the average interest rate on debt across firms and over time
This study uses tax data from the Longitudinal Business Database to estimate the firm-level average interest rate on liabilities.
Monetary policy, equity markets and the information effect
How monetary policy affects the economy is a central question in macroeconomics. Standard economic thinking predicts interest rate cuts boost economic activity. This idea has recently been challenged by claims that changes in monetary policy have a so-called ‘information effect’. Calvin He explores this concept...
Public debt, public wealth and economic dynamics
The unprecedented government response to the global pandemic has pushed public debt in many countries to historic highs, relative to output. This paper assesses the arguments for and against fiscal expansion and rapidly rising public debt as a means to invest in comprehensive wealth.
Federal debt policy in an era of low interest rates: a guide to the issues
Economists and others have worried about the long-run outlook for the federal debt for decades, recognising that the ageing of the baby boom generation would lead to budgetary pressures associated with increased spending. Set in the American context, this guide covers many issues that currently...
Doing whatever it takes with someone else’s money
New Zealand is now on a dangerous path to higher public debt and unprecedented money printing, with no credible plan for unwinding the situation before the next crisis, warns this report by the New Zealand Initiative.
Home loan price inquiry: interim report
This interim report shows that the big four banks considered various factors as they decided whether to pass on the RBA’s June, July and October 2019 rate cuts. But recovering profits was central to their decisions to not always fully pass through the lower rates...
The distributional effects of monetary policy: evidence from local housing markets
This paper examines how monetary policy affects housing prices across local areas. It also explores three related questions - How differently do housing prices respond to monetary policy across areas? What can explain these differences across areas? Does monetary policy cause changes in the housing...
Monetary policy is spent: it's fiscal policy or bust
This paper argues that monetary policy in Australia is no longer effective and the task of stimulating the economy should be taken up by more active fiscal policy leadership from the Australian government.
Lessons from quantitative easing: a guide for Australian policymakers
This report argues that quantitative easing (QE) is an operating instrument for policy, rather than a monetary policy as such. As with policy conducted via official interest rates, QE’s effectiveness depends on the policy framework in which it is located, as well as how the...
Working towards a fairer consumer credit market
This paper considers interest rate caps, what is known about their use and impact in other jurisdictions, and how might they contribute to a fairer consumer credit regime in New Zealand.
Explaining monetary spillovers: the matrix reloaded
Using monetary policy shocks for 7 advanced economy central banks, measured at high frequency, this paper documents the strength and characteristics of interest rate spillovers to 47 advanced and emerging market economies.
The Chevron Australian Holdings case and the reach of the arm's length principle
The recent decision by the Full Federal Court in Chevron Australia Holdings Pty Ltd v Commissioner of Taxation  FCAFC 62 is a watershed, not only in Australia but internationally. It provides important insights into how the arm’s length principle takes account of the economic...
Australia today: slow growth, high debt
Australia has become an economy burdened down with debt. The burden may feel light now, with interest rates so low, but as they rise it will become heavier, and slow our capacity to grow.
Global equity fund performance evaluation with equity and currency style factors
We propose a method for global equity fund performance evaluation that extends existing research by addressing both equity and currency factor exposures. Returns in excess of the risk-free rate are decomposed into contributions arising from the market, exposure to six equity and three currency ‘style...
Home loan interest rates and repayments
Mortgage affordability and the ability to purchase a home has become a highly sensitive political issue in recent years. Indeed, the issue of indebtedness of Australian households, through credit cards, personal loans and mortgages, is now a regular topic of debate. This background note provides...
Above average rates, average performance
The government of low interest rates hasn't done notably well in comparison to other western economies, writes Peter Browne.
The effectiveness of mandatory comparison rates: information, capacity and choice – final paper
One recent means of addressing the supposed asymmetry of knowledge between finance providers and consumers has been the introduction of mandatory comparison rates, which calculate the total cost of a fixed term loan, including interest and all fees and charges. Scott Ewing looks at Australian...
Tightening the mortgage belt
The recent decision by the Reserve Bank of Australia to increase interest rates following seventeen months of unchanged, historically low rates has generated interest in the impact of this decision on the approximately 32 per cent of Australian households with mortgages. It has also prompted...
Developing equitable and affordable government responses to drought in Australia
Under the National Drought Policy, created in 1992, federal government support for farmers comes predominantly in two forms: interest rate subsidies and a special welfare payment. Support under these programs is only available to farmers in defined areas which have been declared to be experiencing...
Trends in mortgages
This Note provides an estimate of the present average value of home loan mortgages and indicates the strong growth in new mortgage values over the second half of the 1990s to the year 2000. It also examines the variation between States in mortgage values and...