Posted to The Age (9/5/2011) on 9/5/2011 at 4:37 PM
Commenting on “Why June is too soon for an RBA rate rise”
http://www.theage.com.au/business/why-june-is-too-soon-for-an-rba-rate-rise-20110509-1eez3.html?
Predictions by Glenn Stevens and his team at RBA are far from satisfactory. Either the economic models used or the way the results produced by the models have been interpreted need to undergo vigorous challenge.
The trilogy of negative demand, as I called it, is a signal for heading towards a recession. This may sound farfetched, naïve and ill-founded, but a rationalist will see the wisdom of this doomsday prediction. The trilogy of negative demands is real properties, cars and household goods including fashions. These three categories of items are in descending sequence in terms of average value. In recent months, we witness the trilogy of negative demands are taking place.
I have written in many blogs and newspaper comments about my predictions, a lot more accurate than what RBA has been predicting. Using dollar value as the key element in prediction is inadequate. The total quantity demand must be taken into consideration for normalisation.
CPI increase, unfortunately, always targets at increase in price which can be due to real reason and artificial manipulation. If quantity demand is increased, causing shortage of supply and thus pushing up the price, then there is room to call for increase in interest rate to dampen the demand. However, it is irrational to increase interest rate because electricity charges, water rates, local petrol prices have gone up, and that the quantity demand of these utilities or items is in fact unchanged or decreased. In short, the total dollar increases bear no relation to the demand curves.