subscribe to our newsletter
Central bankers finding it hard to kick start growth

Central bankers finding it hard to kick start growth

Deflation will threaten global markets throughout 2015 despite low interest rates and central bank stimulus, according to one expert.

In a paper titled Economic Insights: The Big Issues of 2015, CommSec chief economist Craig James said deflation was “occupying the minds of central bankers in the northern hemisphere”.

“It is quite remarkable, that with interest rates close to zero across many parts of the world and many central banks injecting stimulus via bond buying, that concerns about deflation still abound,” he said.

Mr James said sluggish economic growth in regions like Europe, Japan and parts of Latin America were fuelling deflationary fears.

“Central bankers are finding it hard to kick start growth,” he said. “Confidence remains shaky; consumers and businesses are reluctant to take on debt; and governments are unsure [of] the best way to move forward.”

Mr James said low inflation may be influenced by a change in the commodity price cycle.

“China has largely moved through the ramp-up phase of industrialisation where demand for resources runs ahead of supply,” he said.

“Supply has now caught up, and rather than commodity prices pushing higher, they are moving south, injecting a deflationary pulse.”

Mr James also suggested that lower oil prices were contributing to the risk of deflation.

“Saudi Arabia is effectively trying to support its competitive position, and the position of OPEC more generally, in the global oil market,” he said.

“US energy production has been ramped up through shale oil, and in other economies, gas, ‘green’ energy solutions, and nuclear fuel.”

Central bankers finding it hard to kick start growth
mortgagebusiness logo

Latest News

It is incumbent upon home loan assessors to assume that a credit card holder has the capacity to meet full financial repayments within a “...

The number of Australian homes generating a resale profit has declined, with national resale gains the lowest they’ve been since October 2...

The federal government has announced the resignation of the corporate regulator’s deputy chair, Peter Kell, following seven years of servi...

FROM THE WEB

podcast

LATEST PODCAST: Upheaval at the major banks

Is enough being done to ensure responsible lending?