No QE says monetary curmudgeon Stephen Grenville:
QE1 was a powerful instrument in rescuing key financial markets which had frozen, but this experience has no relevance for Australia in the foreseeable future.
When the current monetary system was put in place in Australia in the 1980s, ‘free markets’ were the lodestone of policy. The RBA would set the short-term interest rate but would not try to influence the rest of the yield curve (in the way the government had set the bond rate in the immediate post-war years). This was not just about free-market doctrine: as well, there was a belief that the market-determined long end of the yield curve gave useful feedback about the underlying state of the economy, inflation expectations and the proper price of capital.
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