Didn't John Howard run his monetary policy, in Opposition, by looking through his rear view mirror? MickS

At least he was looking...

My money's still on Australia's property bubble to burst, hence deflation, Henry, before a hyperinflation sets in well down the track once "Quantitive Easing" shows up for canard it is.

And, in a price drop, of course, ratcheting interest rates up becomes self-defeating.

But, yes, I agree with you that RBA interest rates settings must be set with a much broader vision, Henry, as I suggested back in 2005:- http://www.theage.com.au/news/Opinion/Resource-rents-hold-the-property-key/2005/06/14/1118645806738.html

... and in http://www.theage.com.au/business/economic-deja-vu-as-powers-that-be-play-same-old-tune-20081119-6bn1.html

- BK

see http://secretofoz.com The Global reserve banks caused this deprssion like all the others.The big end of town should never have been bailed out.There is no such thing as too big to fail.The US is in greater trouble because of the Private Federal Reserve policies.

They are creating the same problems of the 1930's depression.

I love the way economists analyse their dog's breakfast as if it was a science!
Of course they need a show of rigour to rationalise the fact that their goggle-eyed abstractions (uncannily inaccurate) blindly scry the whole spectrum of human excess, banality and wretchedness on the ground. Economics has hit the mother-load of lies, indifference and euphemism---'creative destruction' for instance.

The first prerequisite of economics=myopia.

Most of the economic babble is a smokescreen for the fact that "wealth extraction" industries that contribute nothing to the real wealth of nations have been allowed to get too fat, too fast.
Think about it: When thousands of bankers, Wall St traders and others make multi-million dollar annual salaries and are allowed unlimited scope to minimise their tax...who is paying? Where does the energy, materials and skill come to house, feed, cloth and fly them around the world? Is *any* job valuable enough to justify a salary that would set a normal person up for life after 1 year?
Rampant profiteering based on an artificial price of funds has denuded the economy. Bailouts and unlimited bank profits (paid to execs and shareholders, *not* retained to make them safer!) have cost the real economy dearly without fixing any structural issues.
So we can talk about government spending, monitory policy, etc, but so long as we allow fraudulent profits from unproductive industries, and corporate welfare for non-viable industries then the real economy will suffer.
Competition works to maximise utility only when profits are minimised as a result. If not, then high profit "industries" like banking, trading and insurance are just a fat-cat tax on the real economy without the transparency nor controls of government taxation. Allowing folks to get rich from what amounts to legal Ponzi schemes *will* damage the wealth of the rest of us non-criminals!

"Highly relevant warnings from people with the runs on the board were ignored, and the reputation of the RBA was only saved by the onset of the global financial crisis. Even so, the CPI shocked on the upside in reaching 5 per cent, dangerously in the red zone."

Surely the lesson from that period was that the RBA raised rates too high. It had to embark on a massive, emergency easing of monetary policy when the GFC hit!

The global economic surge that stoked Australian inflation was partly driven by unsustainable credit growth. It was an illusion. Just because few people saw the collapse coming, doesn't let the RBA off the hook.

Some would argue the strength of the Australian economy now is illusory, yet the bank is too obsessed with short term movements in the terms of trade and is not seeing the fragility of the global economy (sovereign debt crises and a Chinese slump my main worries)

Even worse, Labor has trashed the budget and can't come to our aid on the fiscal side if GFC II hits..