The Reserve Bank of Australia will go down in history not only as the most corrupt central in the world but also the planet’s most stupid (or high).
Let’s recall its record over this business cycle. Post-GFC it got it right, raising interest rates to increase bank profitability and suck in deposits to allow the financial system to repair a balance sheet far too dependent upon wholesale foreign capital. This accompanied a very sensible deflation of the GFC stimulus house price bubble and an open declaration that Aussie household debt had reached dangerous proportions.
Alas, this brief moment of sanity quickly gave way to an huge toke on the bong. As China stimulus boomed, the Global Financial Crisis lesson was swiftly buried under rhetorical trash like the phrase “North Atlantic Financial Crisis”. This fallacious division of the planet into good and bad poles framed a shift of tightening policy from backing out of emergency interest rates to overly high rates (and currency). This was supposed to engineer a “structural adjustment” to “mining-led growth” which would drive Australia forward in a thirty year China boom. The out of control Australian dollar threw non-mining tradable sectors into the sea willy nilly.
