1) If I was head of the RBA one of my aims/goals would be for profits. In "theory" aren't all Australian shareholders in the RBA. What is the point of any bank, if not to make a killing on insider trading
For the simple reason that Stevens doesn't get paid according to how much the RBA makes. Putting it another way, if you tell a bank director 'we pay you the same base salary no matter how much profit the bank makes', they're not going to be focused on profit. The point of the central bank, simply, is NOT profit.
. Sure the official RBA mandate is to keep CPI inflation in check but phat profits are a good secondary to aim for. Steven's could be just a true patriot making $ for all the Aussie battlers out there.
I doubt profit is in the RBA's mandate. He certainly doesn't get praised or rewarded for making profits. You really think the standard battler would prefer higher RBA profits and pay higher mortgage rates compared to lower mortgages rates?
2) Making fat profits for the govt could be taken as politcal motive. But I am guessing that wasn't your point. I think the RBA can run the line that it is mandated to keep the "economic ship" steady by the means assigned to it and if that means it can make profits on forex hedges all the better.
Again, what incentive does Stevens have to maximise profits? He doesn't get paid a bonus. He isn't beholden to either political party, as he showed when he raised rates on the Howard government who appointed him. That, more than anything, showed me the RBA is politically independent.
What I guess I am trying to get across is that house prices are not the be all end all of the RBA's machinations and that a booming Resi market can give it an excuse to push Interest rates in the RBA's/the govt/australia's favour.
And I'm saying the RBA doesn't care what the interest rate is, as long as it achieves their mandate. There is no 'favourable' direction for interest rates. The interests of the RBA, the government and Australia may be different. The government always wants lower rates. The RBA is neutral in that it'll set rates at whatever is necessary based on its view.
Ask yourself, what possible good can higher rates do for a government considering higher rates almost certainly ticks off borrowers (voters)? The RBA is, and has shown itself to be, pretty independent.
Putting on the white hat on TV and going out and saying don't blame us blame the resi speculators/market when rates begin to bite is nothing but PR.
The RBA doesn't need voter approval, since they're not elected.
Having said all that I reckon the RBA board and GS are doing a great job. Especially in the face of pressures from other economies to keep rates low.
That's the only part of your post I agree with. I think the RBA has done a great job raising rates into the top of the boom to take the edge off, then cutting quickly as things hit the fan. Now it's building up ammo by raising rates again.
