The Reserve Bank governor Glenn Stevens doesn't think it's an emergency. Here's what he told the House of Representatives economics committee in February: "My sense is that the appropriate interest rate for the economy's circumstances is in fact the pretty low one we have, not because we face an emergency like we did back then but because we face some other forces of a more slowly evolving nature." He added: "I am not uncomfortable with this setting of rates." Why is he not uncomfortable? Why does he not think this is an emergency? part of the answer lies in his use of the plural "rates", instead of "rate". Mr Swan also used the plural back in 2009 when he referred to rates "at emergency levels". The Reserve Bank targets retail rates, not the cash rate. The cash rate is merely the instrument it uses to target retail rates. The governor explained it this way in a speech Adelaide mid last year: “They are the rates that matter, they are the rates that do the work in the economy, and we are trying to calibrate what we do to get what we think are the right levels for those.” And those retail rates are still not at the emergency lows reached in 2009. And the economy itself is in nowhere near the state it was in during the 2009 emergency. Back then economic growth slid to 0.6 per cent. It’s now 2.6 per cent.
