The Reserve Bank of Australia (RBA) should rethink its interest rate policy and consider raising them, Nine Finance Editor Ross Greenwood says.
With interest rates cut to a record low 0.75 per cent by the RBA last week, Australia joined other major economies in slashing rates to near zero.
Reserve bankers around the world regard lower rates as an economic stimulus. The cut came as the latest economic data shows the Australian economy is slowing down.
But Greenwood told Today there are benefits from higher rates, including a higher dollar.
“What would happen then is a lot of imported goods would become cheaper. Cars, electronic goods and petrol would become cheaper,” he said.
Economists say the cost of petrol is an important factor in consumer spending. Lower prices at the bowser could help raise household spending and stimulate the economy.
Greenwood says while a higher dollar may not be welcome by Australian exporters, it would help stimulate consumer spending, which – despite tax cuts – has slumped.
“The retail sales numbers show people are barely spending any money at all. They’re saving their money, they’re paying down their debts and mortgages,” he said.
Greenwood said going against the current economic convention could work for Australia.
“Sometimes you need to do the opposite … nobody got rich doing what everyone else is doing,” he said.