The Reserve Bank has released a study on economic uncertainty. The report states that uncertainty can be an important driver of economic outcomes.

This is an example of finding causation from correlation.  Economic outcomes is a contributing factor to uncertainty. To now say uncertainty causes economic outcomes is the same as asking which comes first. The chicken or the egg.

The Reserve Bank should spend less time on finding correlations. It should spend more time on finding and removing causes of economic uncertainty over which it has control. The Bank can get rid of monetary inflation.  Instead of having a positive target for inflation the Bank can have a zero target.  Allowing anything other than zero causes economic uncertainty.

The Bank can stop inflation of the Australian dollar. They can do this by creating money in ways that does not cause inflation. We hear all sorts of arguments from economists on why inflation is necessary.  They are chicken and egg arguments.

Economists give advice based on modelling. The model used in money creation is the Efficient Markets Hypothesis.  It is time the Reserve Bank trained their economists in new models that better reflect reality.  One such model is Promise Theory. Another is Complexity Theory.

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