Australian central band chief said on Tuesday, that the jury is out on whether exceptional monetary policies around the globe have contributed in stimulating activity in the real economy other than just encouraging risk taking behavior in financial markets.
Governor Glenn Steven of the Research Bank of Australia emphasizes that quantitative easing has obviously contributed in lowering borrowing costs around the globe but its just not clear if this lead to a higher business investment. He continued by suggesting that some would take this to imply that the unconventional monetary policy has not been all that effective others would say that this was indicative of the fact that policy did not try hard enough. He said that it was difficult to draw a clear conclusion from the picture.
He pointed out that the slow recoveries in many major countries could just be a consequence to the loss in business confidence and that could not be changed by interest rates.
He explained that if people started believing that return – regardless of the past returns – would be low in the future, this would be a huge deterrent in investment. However he also elaborated that this pessimism couldn’t possibly last forever, in fact, steps should be taken to curtail its damage and convince investors otherwise. He regarded the growth agenda being pushed by the group of 20 nations (G20) to be helpful in restoring confidence. This involves supply side reforms, increased infrastructure investment, ensuring a safe financial sector and progress on free trade agreements.