Mar 042008
 

Another twenty-five basis points today added to the ‘cash rate’ by which the RBA monitors Australia’s economic need to grow or slow.


Reading through the RBA’s treatise on Monetary Policy I’m struck by the graphic below.

inflation_over_the_long_run_290108.gif

Back in 1972-73, lending rates were regulated. Home loans could be had at between 12% and 14%. From memory, I believe they were set at 13.5%. Banks controlled their lending against capital adequacy by shifting loan buckets between trading banks and savings banks. Of course, no such differential exists any longer.
I don’t recall what economic conditions were like back then. In fact, I didn’t care a whole lot, given that I was 15 years old & bullet-proof. Did regulation of the finance industry provide the brake on inflation, or was there simply no brake? I’d be interested to find out.