University of Western Sydney associate professor of economics and finance Steve Keen is radically bullish on interest rates, predicting a 2% cash rate by the end of 2009, dropping to 0% in 2010. Dr Keen said the RBA would become more concerned about high household debt levels than inflation, as deep rate cuts in 2009 failed to stimulate the economy. ''They (the RBA) can cut the pain but they can't boost the economy.'' Earlier this month, the RBA cut interest rates by 100 basis points for the first time since May 1992. The RBA cut rates by one percentage point on five occasions during 1991 and 1992. Dr Keen said another series of deep rate cuts were needed now because household debt levels made up a much bigger portion of gross domestic product (GDP) than in the early 1990s. He said central bank policymakers before the 1930s Depression focused on consumer price inflation and ignored asset prices, and have repeated that mistake more recently. ''Reserve banks everywhere go it wrong, not just ours,'' he said. ''They focused on the wrong problem which was inflation.'' Macquarie's Mr Robertson said the RBA was more concerned about reversing the 12 rate rises from 2002 to March this year and would deliver bigger than usual rate cuts before Christmas to reduce home mortgage and business borrowing rates.
