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Wanted: some out of the box thinking at the RBA : Comments
By Jonathan J. Ariel, published 12/9/2019The RBA has pushed interest rates down about as far as they can go and needs to look at other remedies to make the economy grow.
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You wrote that "No. They have not been pushed down about as far as they can go; they can go to zero or minus, as they have in Demmark".
But the reality is that lower rates did not raise business investment. In fact, Denmark is now at risk of a recession if growth in the world economy fizzles out. Both DK and AU are open economies, subject to global economic machinations, but DK is better off as it has 27 EU tariff free neighbours to work with. We don't.
If we lower rates to zero and investment remains unchanged, which is very likely because it isn't rates that so much determines if a company invests as the industrial relations landscape, what then?