Christopher Joye

In The AFR I argue that the RBA has lost the plot in cutting the cash rate to new record lows on the basis of its forecast that it's 90% confident that by the end of 2017 underlying inflation will be between 0.75% and 3.25% (yes!!) while economic growth is around trend, the jobless rate has fallen to a historically low 5.7% and house prices continue to surge at double-digit rates. For what it is worth, the RBA's "90% confidence intervals" around its 2017 forecasts for real economic growth and the jobless rate are, respectively, 1.0-4.5% and 4.5-7.0%. So the only thing our central bank can assertively say about next year is that the economy could be undergoing a mega boom or bust. We would do no worse entrusting monetary policy to my five-year-old son, who as a maths savant has at least one edge over Martin Place's mandarins. In this column I go on to define the role of "active" as opposed to "passive" investment managers, and what the "search for alpha" really means...Free (VIEW LINK)


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