Seemingly tricky question. Simle answer. Interest rates are so low because the economy is stuffed.

The term "sovereign debt" has a specific meaning: government debt in a foreign currency. Or more precisely, in a currency that the government doesn't issue (which is why eurozone nations have such big problems).

Australia has taken on very little sovereign debt in the past thirty years, and none at all in the last twenty.

So sovereign debt is a red herring: the real problem is that since the GFC, governments have been far too timid about taking on debt. They want the private sector to do so instead, but the private sector will only take on debt when it's profitable to do so. So interest rates have been reduced to make it more profitable to do so. And when merely reducing interest rates wasn't enough, some governments resorted to QE.

Does anyone know if Australia engages in quantitive easing? I am always suspicious how our dollar decreases against the greenback and yet we are not the ones metophorically printing the money.

The stats this article relies on look wrong to me. Australia’s real bond yield was not below 0 for 50%+ of the years between 1945-46 and 1968-69. Using the RBA preliminary annual database data for 1945-46 to 1968-68 to compare the long-term bond yield with annual growth in the consumer price deflator yields 7 of 24 years with real interest rates below 0. I couldn’t find Consumer Price Index data before 1948/49, but for the 20 years from 1949-50 to 1969-69 there were only 5 years when this inflation measure exceeded the bond yield.

True, most years the real yield was less than 3%, but 3%pa real is actually a pretty good return on a risk-free investment. Would that real wages grew that fast.

Ps sorry, I couldn’t find the RBA Preliminary Annual Database I used for this analysis on the web, but this is the reference:

http://www.rba.gov.au/publications/rdp/1977/7701.html

Quantitative easing is as simple as a few strokes of a keyboard, we could literally double the money supply; as an alternative to borrowing ever more foreign capital, or lowering the interest rate to historical lows.

Aidan is correct, and something former insightful Leaders didn't shy away from; in order to build the visionary Snowy Mountains Scheme! Even though burdened with historically high war debt!

But only if this money was exclusively earmarked for income earning infrastructure projects!

Such as the long overdue range crossing project and rapid rail?

And given bulk freight forwarding remains possibly one of the most profitable business models in the world!?

Crack on building a Nuclear powered national shipping line; rolled out as rollon roll off fast ferries; that fill in the missing rapid rail links between us and our major trading partners.

Roll on roll off minimizes the workforce need to load and unload commodities, which could remain untouched in the same "sealed" containers from supplier to destination; and delivered as complete train loads?

which is the most efficient method of transporting manufactured or bulk trade goods!?

And given the cheapest power in the world; (very doable as carbon free power) those trade goods could include finished steel and aluminum, made via the locally invented direct reduction process; and consequently more than competitive than anything the emerging economies can create, via outdated traditional methods!?

If we started to simply sell more trade goods to the world than we buy, we wouldn't need to keep stimulating the economy with historically low interest rates?

We've bought a lemon, with the fundamentally flawed advice, we should do what we do best; (which is not actually finally or factually established) and therefore massively over reliant on easily corrupted service industries, the very first to go with any new GFC!

Which often have an adverse effect on housing affordability!

We need at long last to learn from our historical mistakes,, rather than like the proverbial mad hatter, endlessly repeating them; and tantamount to simply/endlessly changing the deck chairs on the Titanic!?
Rhrosty.

Economists were invented to make astrologers look good.

The only sense I have ever been able to make of the economy is by looking at the demographics of the relevant country. At the moment the baby boomers of Australia the US and UK are entering retirement in droves. The first thing a retirees does is go for a holiday, then thy go into hibernation, and horde most their money, either just to make it last, or so they can leave it to the kids. It is the only reason I can think of that the Americans could get away with creating trillions of dollars, and not cause massive inflation.

All that playing around with interest rates ever did was to stuff up the economy. When they are to high only the gamblers and the rip off merchants borrow money, when they are too low then people look elsewhere for decent returns and often get burnt.