Parkinson warns on low rates

Parkinson warns on low rates

By Daniel Palmer

Mr Parkinson said the risk of pulling back too soon on accommodative monetary policy could be overcome if Treasurer Joe Hockey's G20 growth push is supported with firm actions from policymakers. “It is my view that the most effective salve to these concerns is for the global economy to return to sustained growth,” he said. “This is necessary to generate sufficient corporate earnings and maintain low default rates that justify the increasingly elevated valuations across a range of equity and credit markets.

Meanwhile, a record low cash rate in Australia has led to the big banks this week reducing mortgage rates to unprecedented levels as competition in the housing market heats up. “Monetary policy needs to continue to play a supportive role,” Mr Parkinson said during a speech in London overnight. “Of course, there is a certain point at which the build-up of undesirable risks becomes a concern.

The treasury secretary added that the action of central bankers in the wake of the crisis was necessary and prevented a much worse outcome, but the time was nearing for a reversal of easy monetary policy. “We are now in a situation where we need to take the pressure off monetary policy,” he said.

Read more here: Business Spectator


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