Monday, March 29, 2010

"This is where it all happens? Now, where does everyone sit?"


Glenn Stevens has become the people's governor, following his unprecedented appearance on Sunrise this morning, jawboning direct to the public.  It's worth watching the full five minutes:




Good for Sunrise, good for the Bank. And an example of what commercial television can still do well.

Full transcript below:


KOCH: Well, he's the bloke charged with safeguarding your wealth and that of the country. Reserve Bank Governor Glenn Stevens is a really bright, unassuming character who really did save this country from the worst of the global financial crisis.

You don't know about him much though, because he's never done an in-depth TV interview before. To mark the 50th birthday of the Reserve Bank he sat down with Sunrise to talk about a whole range of things, including how he sets interest rates and where they're likely to go.

KOCH: The first Tuesday of every month at 9:00 o’clock on the dot the Reserve Bank of Australia Board sits down to talk money and interest rates. It's a big decision with even bigger consequences for all of us.

KOCH: This is where it all happens?

STEVENS: This is where it all happens.

KOCH: The boardroom.

STEVENS: This is the boardroom.

KOCH: Now, where does everyone sit?

STEVENS: Well, I sit here at the uncomfortable spot where tables join and...

KOCH: (laughs)

STEVENS: The Deputy Governor typically sits to my left. We have a couple of senior members of staff who sit to the right.

KOCH: Does it get pretty feisty around here when you're discussing - particularly whether to move interest rates? Or do they generally take your advice?

STEVENS: Feisty isn't the word I'd use to describe the discussion. It's very well-mannered but it's certainly intense. They're not here to be a rubber stamp, they're here to test our arguments and to make sure that we're on the right track.

KOCH: Because I suppose a lot of people, particularly small business people and mums and dads would say - "OK, these are all pretty highfalutin people, you know, they're all in the top corporate world. What would they really know about my experiences?"

STEVENS: The board members are very experienced people, they get out a lot. They're only here one day a month. The rest of the time they're undertaking their regular activities, and a couple of them are actually small - in that sense – business people themselves.

This is...

KOCH: Trading room?

STEVENS: Yes.

KOCH: Before making its decision the RBA also checks in with 100 small businesses each month to gauge the real economic health of the nation at the coal face.

Because the decisions made here affect so many people. Does that weigh heavily on the decision making?

STEVENS: The thing they're also weighing is if we wait too long, do we end up having to do more than that, and those people would actually end up in a lot more pain.

KOCH: Rates have already jumped a fair bit from the lows, so how much higher are they likely to go?

STEVENS: We cut interest rates to what we call emergency settings when we had an emergency, when we thought we really were going to face a big downturn and we wanted to try to get ahead of that. Once the emergency has passed and things gradually look more normal, then it's not wise to leave interest rates right down at rock bottom any longer than we need. And you shouldn't assume they'll stay low because that assumption will prove to be, you know, unfortunate.

KOCH: So, you're sort of preparing us that interest rates are going to go up?

STEVENS: I think it would be - not doing people any favours to have a prolonged period of very low rates and then hammer them unexpectedly and, of course, the banks that are lending them money should be - and I'm sure are - testing the potential borrower - can you handle some rise in interest rates?

KOCH: When you look at things at the moment, is there anything that we should be thinking about, concerned about?

STEVENS: I think it is a mistake to assume that a, you know, riskless, easy, guaranteed way to prosperity is just to be leveraged up into property. You know, it isn't going to be that easy. And I think if we think about property prices as parents - you're a parent, as am I - I've got kids that within not too many more years are going to want somewhere of their own to live and you wonder, you know, how is that going to be afforded because the prices are getting quite high.

KOCH: Thanks for joining us.

STEVENS: Pleasure. Thank you.

(package ends)

DOYLE: Wow! You even wore your best pin-striped suit for that and a tie.

KOCH: I know I had to put a tie on. I was so nervous with that.

DOYLE: What did you do? Did you get a photo?

KOCH: No I was a bit embarrassed to get a photo.

But just look at what he was saying; Inside the board room, how cool is that?

DOYLE: Very cool.

KOCH: First Tuesday of every month, look at that - where he sits. He sits where the leg is so has the most uncomfortable seat on the table.

DOYLE: That is noble.

KOCH: But saying – be careful, interest rates are going to go up, and be careful about over extending yourself into property. Take the advice, he is the guy that sets it.




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3 comments:

carbonsink said...

Thanks Pete. Seems like Victoria needs its own monetary policy to cool the Melbourne property market.

Anonymous said...

Victorian land taxes are significantly lower than NSW when it comes to the $1m - $1.5m price bracket, a popular price point for these foreigners. The parents will buy a house with high land content for PPOR purposes whilst their kid studies in OZ. Then once the kid finishes study and heads home they will just sit on the land and the only holding costs is the 0.88%pa land tax. Holdings costs are trivial compared to the expected 10%+pa returns. Mr Brumby must up the land tax to deter the concentrated foreign land banking happening in Melbourne.

carbonsink said...

Permabull Adam Carr says: Kill the April hike

Now regular readers will know that I’m bullish. [Er, no kidding Adam] I’m one of the most optimistic in the market. But I’m always prepared to accept when I’m wrong and I’ve got to tell you that I don’t like what I’m seeing so far.

Tricky one for the RBA. The national pastime has clearly got out of hand in Melbourne, but the national numbers are telling a different story. So much so, that property spruiker extraordinare Chris Joye is now telling people Sydney prices have been falling in real terms since 2003. The comments from Stevens have clearly rattled the spruikers. If anything, they've been too successful at cheerleading the property market higher, and now that Glenn is threatening to take away their punch bowl, they're trying to play it down.

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