‘Madness’: Calls for negative interest rates rejected

The Reserve Bank has left the official cash rate unchanged at a record low 0.25% but that hasn’t stopped some senior economists from speculating that negative interest rates could be necessary within the next 12 months.

Westpac’s Chief Economist Bill Evans made the case for negative rates and argues the unconventional monetary policy would help stimulate the economy by allowing the banks to lend to businesses and home buyers at extremely low rates.

RBA Governor Dr Philip Lowe has consistently and defiantly rejected calls for Australia to consider negative rates, arguing the radical policy simply doesn’t work.

Speaking with Brooke Corte, Police Bank CEO Greg McKenna agrees with the Dr Lowe and says negative rates sends the wrong message.

“I think it’s madness,”

“If we were to go negative it would send all the wrong signals,”

“If you start telling people that you’ve got to save more to save money because you’re getting a negative interest rate, people will stop spending,”

“If a business isn’t going to spend when the cash rate is at 0.25 then they’re not to spend when it’s -0.25,”

Click play to hear Brooke Corte speak with Greg McKenna: