September 27, 2020
Stephen Miller writes for The Australian Financial Review:
It is perhaps an apocryphal story, but back in the 1960s, former US President Richard Nixon was attributed the phrase, “we’re all Keynesians now”.
Others attribute it to former Nobel laureate Milton Friedman not as a prescription, but rather as a descriptive criticism of the prevailing macroeconomic policy orthodoxy in the late 1960s and early 1970s.
In the present circumstance that phrase might be adapted to “we’re all fiscalists now”.
The singularly most important message coming from central bank communication in the last week is not only that it needs fiscal help, but that fiscal policy needs to be the primary macro policy tool. It is a clear and consistent message from Jerome Powell to Christine Lagarde to Philip Lowe and Guy Debelle here in Australia.
And it is one governments need to heed (with of course the important proviso that those fiscal measures be intelligently crafted).
The lack of any fiscal follow-through has been a big factor in the recent unnerving of markets.