Yes, I beg your pardon, that was a typo... I did of course mean the RBA inexplicably CUT the cash rate three times in 2019, sending it from 1.50% in May to 0.75% by October.
And you're right, it does pay to look at the facts:
The fact is, there was no need to counter fiscal policy by further loosening monetary policy at the time, certainly not via three rate cuts in quick succession. APRA themselves provided more accommodating fiscal policy immediately after the 2019 election, by removing the need for borrowers to have to be able to pay back a loan at 7.25%. The effective lending buffer dropped to about 5.5% which combined with the aggressive rate cuts, saw home loans in NSW increase by $110k in the following twelve months, and in Victoria by $95k. Whether you put it down to political pressure or simply poorly thought out monetary policy, the RBA effectively helped increase the private sector's already extremely high debt burden, something which for years prior, it claimed it was concerned about.
The unemployment rate at the time was about 5.1% and edging lower, and while GDP growth was rather anaemic at sub-2%, whether such aggressive rate cuts were necessary to stave off a potential recession at the time is debatable. In fact, it is the RBA's and other Central Banks' obsession with avoiding recessions that has the world in such a state right now. Recessions are an integral part of economic cycles. Through our attempts to avoid them at all costs, we have removed important checks and balances from the economy and encouraged riskier and riskier private sector behaviour.
Paul Keating was right when he said the early 1990s recession was one that we had to have; from that recession came a prolonged period of sustained economic growth. Sadly though, we've milked the system as much as we could for the last 30 years and we're now due for another one. Not the 'technical' recession of two successive negative quarters of GDP we had in 2020 where the government stimulus and emergency rate cuts saved everyone; we need a proper recession, to weed out those who've taken on excessive risk, and to bring back some economic discipline which will sow the seeds of sustained prosperity once more.
