The Australian monetary policy regime is shifting. Historically, the almost single driver of monetary policy settings in Australia was the RBA’s cash rate. Indeed, there used to be a very strong causality of RBA cash rate moves with borrowing rates. With 85-90% of mortgages on variable rates (and linked to short-end rates), the monetary policy transmission mechanism had an almost immediate impact on both the flow of new loan demand, as well as a cash-flow impact on existing borrowers (as banks would typically quickly ‘reprice’ the ‘back-book’).
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
