Would you be alarmed if the Reserve Bank (RBA) starting flooding the country with money to buy government bonds? We’re talking about billions of dollars. And it would be a big drop -- kind of like opening the window and throwing cash into the street.
The technical term is "quantitative easing". It's a practice that hasn't been used in Australia since the 1930s even though the central banks in the US, Britain and many European nations have been doing it since the Great Recession. It’s been talked about here since the middle of the year, when it was all too apparent the succession of official interest rate cuts by the RBA wasn’t stimulating economic activity or boosting wages. Now it’s crunch time.
On Tuesday the RBA will meet, and it’s almost certain the board will cut rates again to a new record low of 0.75%. RBA governor Philip Lowe all but confirmed it last week, citing continued weak signals in the domestic economy and new global conditions as probable reasons to make further monetary easing likely.