I don't recall business all that many businesses going to the wall during Keating's time, infact I recall high activity. It was that surging domestic economy that forced the cash rate up to 17.5% as a way to put the brakes on while at the same time the world was in large part suffering a recession.
In 1981 the real average home loan rate was higher than 18% (census data), the US hit nearly 20%. In 1984 the foreign exchange crisis resulted in the dollar float. The dollar was now driven by market forces, not the RBA, but that didn't stop the RBA jacking up the interest rates to temper the rush for loans and excessive consumption. In 1987 the global crash hit which by 1989 had pushed the rate up to 17% for period of 11 months and then recession later in 1990.
The RBA then changed it's focus to controlling inflation at 2-3% and allowing labor employment to fluctuate as a tradeoff.
The 80's and 90's suffered from the stagflation 70's, global oil crisis, sharemarket collapses, carpet baggers, tarriffs, petty politics and way out of date economic models that hadn't kept up with the big world hitters. The die was cast for resetting recession way before 1990, but once we had it the low inflation model was secured and a buffer against recessions.
Under Hawke/Keating my business trading loan was capped at 13.5%, so what the banks did is lower the asset ratios to encourage home loans, steal business away from building societies and cause even more debt driven stimulus and house price booms. At the same time they were offering lower interest rates to high salary earners and high deposit borrowers.
That's how I see interest rates and how I experienced it. The 80's and 90's was a great time for well run business and personal wealth building ...... not so great for already stagnating businesses and home borrowers who had set their aspirations higher than reality.
