"Also, unlike the US, nearly all mortgages in Australia are floating and not fixed rate. The reserve bank can cut interest rates over night and this cut is passed onto almost every mortgage holder (including low doc loans) in Australia."
Which will cause an explosive breakout in inflation and the aussie dollar would collapse, hence causing a massive current account deficit and trade imbalance.
The RBA can refer to the conditions in the domestic economy but it also needs to look at what is happening elsewhere in the world and it cannot unilaterally go it alone too far for too long.
