China is descending into depression economics. A massive deflationary shock is building. The fallout for Australia will be intense.
It is now the base case that China does not recover but worsens as its cosmic-sized property and infrastructure Ponzi schemes are sucked into a debt-deflation singularity.
This could mean that Australia is forced to restore crisis bank-funding facilities, create new ones and resume QE in the not-very-distant future.
This is the worst time to have a new structure and governor of the RBA.
The RBA will need its monthly meetings, faith in its processes, and not to be wrestling with some new governor and board trying to make its way.
Believe me. You do not want the market wondering about the RBA’s credibility amid a China crisis.
Treasurer Jim “Chicken” Chalmers should immediately reverse the reform process, beg Phil Lowe to stay, and batten the hatches.
