RBA could not hit an inflation fish in a barrel

Tuesday, 24 April 2018

A couple of charts from Damien Boey at Credit Suisse show the problem. Ever since the terms of trade began the great correction in 2011, ending the RBA’s thirty year mining boom in three years, it has been behind the deflationary curve:

This has meant that Australia has carried a giant legacy of a bloated yield differential inflating the currency:

Breeding deflation galore:

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.