And that someone is in far-away Australia, a country that has avoided recession for a quarter century. Things started going wrong for the past few years, when it ignored its NGDP level target and started worrying about home prices.
If you had told Australians 10 years ago that official interest rates would fall to 1.5 per cent, many would have jumped for joy.
Aside from homeowners, Australians are not feeling much joy these days. This is despite the lowest interest rates in 70 years, low inflation, economic growth close to normal and the unemployment rate – though not ideal – still lower than it was during the Sydney Olympics.
So why are we feeling so miserable? The reason is that most Australians’ incomes are going nowhere.
Wages are growing at recessionary levels, profits for small and medium-sized businesses are flat and the budget deficit constrains government spending.
Overall, Australia’s “nominal” growth rate – the growth in actual money in our pockets – has fallen from 7 per cent per annum in the decade before the GFC to only 2 per cent today.
A large part of it is also due to the out-of-date inflation target that the Reserve Bank of Australia has been tasked with hitting.
A better option would be for the RBA to target a reasonable rate of growth in Australia’s nominal GDP.
In other words, we should replace the RBA’s existing inflation target with a nominal GDP target.
Stronger growth in nominal GDP would provide workers and businesses with greater means to pay their debts, hire more staff and invest in new plant and equipment.