The RBA will occasionally make mistakes, but abolishing RBA independence, as some commentators have suggested after this week’s surprising cash rate decision, would be a bad idea. I defended central bank independence in my latest Australian Taxpayers’ Alliance live stream with John Humphreys on Thursday night, citing the historical example of President Nixon pressuring Fed Chairman Arthur Burns to stimulate the US economy, which was already experiencing inflationary pressures (see How Richard Nixon Pressured Arthur Burns: Evidence from the Nixon Tapes). Having grown up in an era of high inflation, and wondering why the price of a sausage roll increased so much at the school tuckshop each year, I appreciate the generally low inflation we’ve experienced since central bank independence and inflation targeting were introduced in the 1990s.

John agrees we don’t want to sacrifice central bank independence but suggests we should consider a radical alternative: ending the government and central bank’s monopoly on the currency and fully embracing the concept of competing currencies. This would require abolishing the taxation of capital gains on alternative currencies, such as Bitcoin and other cryptocurrencies, which is currently in place. It’s a fascinating idea, and I’d encourage you to watch this clip from our livestream on RBA independence and competing currencies:

In our live stream, we also discussed James Tobin’s proposed tax on short-term international financial transactions (i.e. the Tobin tax), John’s concerns over low fertility rates and eventual global population decline (later this century), and our three biggest concerns regarding the Australian economy. Among others, we discuss stagnant productivity, the high cost of the energy transition, and unaffordable housing. You can listen to the whole conversation on my Economics Explored podcast:

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