Ignoring for present their role in money supply, I want to challenge their role, or rather their history in the role of setting interest rates to manage the "business cycle".
Talking about the business cycle is a bit out of the ark really. There is no business cycle as such any more, largely because of government's huge role in the economy and because business is now global on a scale that Maynard Keynes could never have imagined. There is not even a global business cycle however because radiating out from China & Russia (yes still) there are various economies largely controlled by government and not by the cycles envisaged by Lord Keynes.
So, coming back home and worrying about our little corner of the globe, as it stands, I would like to suggest that our central bank, the RBA, has lost touch with the realities and has become too reactive and not enough proactive, which being as they are, public servants, is understandable if not excusable. I would like to see these highly skilled economists and statisticians on the staff of the RBA put forward proactive plans to regulate the stability of the economy based on where they see it going based on international trends in trade, political economy, finance movements, stock markets etc. In other words, I would like to see them surprise us with interest rate moves based on the best predictions available, even when to dumb politicians, whose only expertise is in contesting elections, that might seem outrageous. It's not that difficult, except when fear of criticism is a major consideration, to have a more reactive and fluid interest rate regime. And when you compare it to the last 12-18 months of steadily rising rates, when a swift kick in the crotch might have gained more attention. As I say, it's not nuclear science, it's judgement instead of fear of acting.
