Leading financial economist Chris Joye has written a great piece in the Australian Financial Review on the issue of how long interest rates may stay at the very low levels they are now (RBA’s Glenn Stevens wrong on low rates for long). I’m very pleased he quotes the question I asked Governor Glenn Stevens at his lunchtime address at the Brisbane Hilton on Wednesday. I, the “canny interlocutor” referred to in the AFR, was questioning the Governor’s view that rates could remain low for a long time. From the AFR:
A canny interlocutor questioned Stevens’ rubbery logic. Over the years the governor has, after all, laboured the message that nobody can forecast the future. Cue our sharp audience member: “Governor, on that question of the return to more normal interest rates, which is obviously important, you say it won’t happen any time soon. But given your views on the accuracy of forecasts, would you agree this is not something you can really forecast and, when it does happen, it will happen abruptly?”
Stevens conceded: “I certainly agree with the premise that you can’t forecast very well”. “What will we be doing in a year, I don’t know,” he admitted. So maybe it is prudent to ponder the possibility of a steep path back to “normal” borrowing costs, wherever they lie.