OECD calls for policy tightening
(9 February 2010 – Australia) The Organisation for Economic Co-operation and Development has said that the Australia’s budget and interest rate policy needs to be tightened to further manage the economy’s recovery.
The OECD provides a setting for governments to compare policy experiences, seek answers to common problems, identify good practice and coordinate domestic and international policies.
The organisation’s Australian head, Claude Giorno, told The Australian newspaper that the Reserve Bank was likely to renew its interest rate increases once it was assured that the economy was strengthening and that China was continuing to grow following tightening credit conditions.
Mr Giorno added that he was surprised, like others, that the RBA decided to maintain its key interest rate at 3.75 percent; the OECD is viewing Australia as something of a special case among its 30 developed economy members.
Australia was the only ‘rich’ country to post an annual growth throughout the GFC and recorded a strong population growth, creating pressures to boost infrastructure and housing spending; these factors are both linked to Australia’s export dependence on China’s rapid economic developments, he added.
Mr Giorno also told The Australian newspaper that the RBA and the Rudd government had moved pre-emptively to stimulate the economy, this is also the reason for the nation’s better than expected performance, he added.
Policy makers have to be careful about not being too loose for too long to avoid the risk of too much liquidity in the economy, however, the budget policy was complicated by the infrastructure demands of the emerging resources boom and the related rapid population growth, Mr Giorno highlighted.
Mr Giorno also said that the question is now whether to shift towards the quality of spending; the government needs to be more careful about how it spends money, especially all this infrastructure that’s being put in place.
But Mr Giorno said that, as well as tightening monetary and budget policy, impediments to new housing development needed to be tackled. And the Rudd government needed to concentrate more on boosting the productivity of its infrastructure projects.
The organisation’s Australian head, Claude Giorno, told The Australian newspaper that the Reserve Bank was likely to renew its interest rate increases once it was assured that the economy was strengthening and that China was continuing to grow following tightening credit conditions.
Mr Giorno added that he was surprised, like others, that the RBA decided to maintain its key interest rate at 3.75 percent; the OECD is viewing Australia as something of a special case among its 30 developed economy members.
Australia was the only ‘rich’ country to post an annual growth throughout the GFC and recorded a strong population growth, creating pressures to boost infrastructure and housing spending; these factors are both linked to Australia’s export dependence on China’s rapid economic developments, he added.
Mr Giorno also told The Australian newspaper that the RBA and the Rudd government had moved pre-emptively to stimulate the economy, this is also the reason for the nation’s better than expected performance, he added.
Policy makers have to be careful about not being too loose for too long to avoid the risk of too much liquidity in the economy, however, the budget policy was complicated by the infrastructure demands of the emerging resources boom and the related rapid population growth, Mr Giorno highlighted.
Mr Giorno also said that the question is now whether to shift towards the quality of spending; the government needs to be more careful about how it spends money, especially all this infrastructure that’s being put in place.
But Mr Giorno said that, as well as tightening monetary and budget policy, impediments to new housing development needed to be tackled. And the Rudd government needed to concentrate more on boosting the productivity of its infrastructure projects.
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