Season 1 · Episode 493
Does monetary policy work?
The RBA is lifting rates whilst President Trump wants his central bank to have the lowest rates in the world. Who's right?
Debunking Economics - the podcast · Steve Keen & Phil Dobbie
February 11, 202644m 4s
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Show Notes
In this episode we ask whether monetary policy actually works, as the RBA lifts rates to 3.85%—well above other advanced economies—despite inflation being driven by capacity constraints rather than excess demand. We explore why higher rates may worsen the problem by choking investment and productivity, why the quantity‑of‑money story doesn’t hold when spending velocity rises, and how fiscal tools could target inflation far more precisely. Steve argues that Australia’s deeper issue is its housing‑debt machine: high house prices, bank‑driven mortgage lending, and a credit‑fuelled economy that rate hikes can’t fix and may even reinforce.
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