The RBA believes that Australia is in a fundamentally different position to other developed economies like Japan or Europe, as we have a better demographic profile, higher growth and a more stable, well-capitalised banking system.

This view effectively removes the likelihood of more extreme QE policies – negative rates, private bond purchases – and instead focussed on providing a helping hand to existing mechanisms of a floating currency and fiscal spending.

• No quantitative easing until the RBA cash rate falls to 0.25% (currently at 0.75%)

• No negative rates – The floor for the RBA will be 0.25%

• No private assets – QE would be restricted to Government Debt purchased in the secondary market.

• The trigger for QE will be when “we’re moving persistently away from our targets, our target for full employment and inflation”.

At its core, the speech is a signal that the central bank believes greater public investment and structural reform will be enough to lower unemployment and lift inflation. It hopes that by reducing government bond rates is can achieve the following:

• A lowering of the Australian Dollar

• Increased Government (fiscal) spending

• Downward pressure on interest rates (and mortgage rates)

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