Monday, 20 June 2011

Greek crisis reminds us to keep a steady ship

The crisis confronting Greece at present is a salient reminder that our country's central bank and government must do whatever is necessary to keep the economy on an even keel, over each economic cycle.

Last week, the governor of the Reserve Bank, Glenn Stevens, gave a speech to the Economic Society of Australia in Brisbane.  He made the important point that - although some parts of the economy had some slack, overall, the Australian economy is very strong.  As a result, monetary policy will be set to meet the needs of the whole economy.

Strong economic decisions allow us to succeed

This will always mean that there are some winners and some losers.  The alternative is to satisfy only the needs of a few small groups within the economy.  This failure to take appropriate decisions when they need to be taken is what leads to economic disasters such as those in Greece, Ireland, Iceland, and to some extent even in the United States.

When good economic decisions are taken such as movements in interest rates, careful government spending, or introduction of sensible policies like a carbon tax or mineral rent tax, these create an environment in which businesses and workers can be confident.

Ironically, the failure of the Greek economy may slow down Australia's enough to avoid an increase in interest rates until later this year.

Sensible decisions from the Reserve Bank, sensible taxes such as carbon tax and mineral resources rent tax, all assist in making Australia the world's leading western economy. 

Let me know what you think

Mark S

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