Recent events highlight the necessity of greater economic and financial markets expertise amongst Board members, as well as a reduction in the ability of government to override RBA decisions.
Banks
Reflections ahead of Philip Lowe’s last speech
Arguably the most significant lesson is that future Governors should intervene with monetary policy far less than he did
The RBA’s mistake was cutting the Cash Rate
By cutting too far the RBA helped create high inflation. Normalising interest rates is the economically prudent response.
Bank capital matters more than liquidity
APRA’s changes to liquidity requirements will improvement bank liquidity but won’t stop the need for government assistance during crises
Evidence of excess liquidity is everywhere
Central banks are repeatedly replenishing the punch bowl when the guests are already trashing the venue
It’s (almost) all about the yield
If central banks take away the metaphorical punch bowl, the party would quickly become a riot with asset prices trashed
The end finally appears near for NABHA holders
The announcement that NAB is preparing to call NABHA securities is good news for holders, but it is a reminder of common myths about hybrids
A double win for the major banks
The Federal Government has handed the Australian major banks two big wins over their non-bank competitors
Central Banks Spawned this Crisis
From 2012-2019 central banks should have been unwinding stimulus, but instead they increased it and created a bubble in financial markets and the economy.
A Virtue Signalling Rate Cut
The RBA’s decision to cut rates on March 4th seems more about appearances than cold economic logic.
There’s No Good Case for October’s Rate Cut
The RBA cut the Cash Rate on October 1st, but it has again failed to put forward a decent argument for why another cut is required.
The Dumb Money is Buying Bank Hybrids
The retail buyer base for bank hybrids is taking far more risk to get the same return as institutions buying AAA rated Australian RMBS