Inflation is too much money chasing too few products.
I don't see that occurring here. Particularly, with our open door trade practises. Unless we do something really silly, like taxing capital inflows!
So, the fed ought to be free to keep cutting rates, even if we have to enter negative territory.
Negative rates would be the way to stop investors awash with surplus funds, buying the AUD, and allow our currency to settle to, near, or just below its true value. Around 65 cents?
And if entering negative territory isn't enough, then Quantitative easing ought to be tried.
Can't agree with taxing capital inflow, in any event.
That would see far too many, on the drawing board projects, cancelled or mothballed at the worst possible time.
We can however make a very cogent case for taxing capital outflows, as an unavoidable expenditure tax.
And indeed, the repeal of virtually all other tax measures, leaving virtually only a capital outflow or entirely unavoidable expenditure tax, still doing revenue collecting duty.
This seriously overdue, massive simplification would allow all current compliance costs, to be returned to the bottom line, as an averaged 7% increase.
Which together with a much lower dollar, would do much more to revive flagging industry and exports, than almost anything else we could do!
The accompanying repeal of virtually all the other tax collection mechanisms, including fuel excise and the ubiquitous cascading GST, would hurt either!
But particularly, where the are numbers of diverse firms involved in manufacture!
Look, we subsidise some of this, which in reality, just churns money.
It would be much more practical, if we simply fixed the tax system, so no compliance costs are imposed in the first instance!
The very last thing our economy and the country needs, is yet another layer of expense creating complexity!
Rhrosty.

Rhosty

How would you know what the "true value" of the Australian dollar is? What's that supposed to mean?

As long as people can't save at least 2-5 % of their wage no currency is worth a pinch of crap.

J.K.J. Well, it's certainly not the current over inflated value, and not all that long ago, it was half what it is now!
And indeed, a good deal lower throughout mining boom mark one.
It remains unnaturally high, given current economic settings and outcomes, and certainly not what one would expect, with current revenue shortfalls and expected deficits, which may well be closer to 17 billion than the suggested 12.
Set at around 65 cents, it certainly would produce much more favourable economic circumstances, for all our industries and exports!
Imports would become much more comparable with local manufacture, which would become more cost competitive!
But particularly with the highly subsidised production of more populous economies!
At the end of the day, the stated value remains a permutation, or consensus view.
Other nations are fiddling with their currencies, via negative interest rates, quantitative easing, deliberate undervaluing.
Why shouldn't we take one or two leaves from that book, as opposed to allowing others to effectively manipulate our economy, through a patently overvalued AUD! Or do you think we should resort to taxing incoming capital, with all that would imply!?
You have a nice day now.
Rhrosty.

"Well, it's certainly not the current over inflated value..."

How do you know?

Doesn't that presuppose you know what the "true" value is?

"and not all that long ago, it was half what it is now!
And indeed, a good deal lower throughout mining boom mark one."

But all other things didn't remain equal, did they?

"It remains unnaturally high, given current economic settings and outcomes..."

Relative to what? You're still presupposing a natural or true value, aren't you?

"and certainly not what one would expect, with current revenue shortfalls and expected deficits, which may well be closer to 17 billion than the suggested 12."

You'd expect it to be lower. But why is that a reason to force it to be lower?

"Set at around 65 cents, it certainly would produce much more favourable economic circumstances, for all our industries and exports!"

So there'd be only advantages, with no corresponding disadvantages?
So you know better than everyone else in the world?
So government can manage the economy?

"Imports would become much more comparable with local manufacture, which would become more cost competitive!"

So you know how to design the national economy, and you know what the values of 23 million people should be, even though they obviously don't agree with you?

"At the end of the day, the stated value remains a permutation, or consensus view."

Whereas your stated value remains ... what? How do you know the true or natural value of the Australian dollar?

"Other nations are fiddling with their currencies, via negative interest rates, quantitative easing, deliberate undervaluing.
Why shouldn't we take one or two leaves from that book..."

Are you suggesting that such fiddling actually creates real wealth? Or is it just taking from A to satisfy B?

"Or do you think we should resort to taxing incoming capital..."

a) No.
b) Who's "we"?

"You have a nice day now."

Likewise I'm sure.

I don't actually care what the so-called experts & academic know-all's comment on this but I'm totally convinced that were there a flat tax we would soon find a workable balance of our dollar against other currencies. Our local economy too would pick up overnight. Don't say it wouldn't just because you might not gain as much as you do now.
Of course those who are against it aren't the ones who have concern for our society as a whole.