Keating is right. The Reserve Bank should do more. It needs to aim for more inflation

Abstract

Former prime minister Paul Keating isn’t alone in wanting the Reserve Bank to do much more to ensure economic recovery. In an opinion piece for major newspapers he has said it ought to be directly funding government spending rather than indirectly by buying government bonds from third parties. But we think there’s something else the Reserve Bank can do. Governor Philip Lowe is right to call on governments to spend more, creating “fiscal stimulus”.