Retail giant Solomen Lew criticised on Monday the alleged
mishandling by the Reserve Bank of Australia's (
) of the resources boom. He said the bank's board lacked an
understanding of the broader Australian economy.
Mr Lew immediately called for a cut in the overnight cash rate
by up to 75 basis points to bring back to life the weak economic
growth across the east coast.
"I really believe the RBA has mishandled the mining boom to
the great detriment of the non-mining sector, in particular
retail.... With great respect, the RBA needs to drop interest
rates immediately and I'm not talking about 25 basis points they
need to help stimulate confidence at a time when all of Australia
should be booming," said Mr Lew, who was RBA board member.
He opined that a little inflation would not hurt the
Australian economy, which goes a recent hint from the RBA that
the country's economy cannot grow beyond 3.5 per cent a year
without causing wage inflation. The RBA said the current interest
rates are still appropriate.
"When you look at the eastern seaboard, as far as I'm
concerned, it's completely frozen. There are now new jobs being
created the only jobs are in the west basically and that's the
mining sector," Mr Lew pointed out.
He pushed for an immediate interest rate cut and called for a
rate reduction by 50 to 75 basis points in the next RBA policy
The financial markets are anticipating the RBA to begin
reducing interest rates from the middle of 2012, but investors
are expecting a 25 per cent chance only for an interest rate cut
during the April 3 RBA board meeting.
To worsen the situation, the big four have declared their
independence from RBA policies by hiking interest rates in the
past few weeks despite the decision by the Australian central
bank to retain the current 4.25 per cent overnight cash rate.
Mr Lew also bewailed the lack of adequate industry
representation in the RBA. He recalled that when he was with the
RBA, it had two directors in the retail sector and one
The present board has only one member in the retail industry,
former Woolworths Chief Executive Roger Corbett. During Mr Lew's
time in the board, David Jones Chairman Dick Warburton and
Westfield Chairman Frank Lowy were members of the RBA.
However, a spokesman for Treasurer Wayne Swan rejected Mr
Lew's criticism of the RBA board's composition which he said had
appropriate range of experience, knowledge and perspectives from
across the economy.
"I have a view that they are not in touch with the market and
don't understand where the economy is at the moment.... There is
a big danger of jobs being lost and that has put a dampener on
the economy," he warned.
Mr Lew served as RBA board member from 1992 to 1997, when he
was the chairman of Coles Myer.