It is amusing how we have shifted from nobody believing our early May forecast that Aussie quantitative easing (QE) was coming to it suddenly becoming the consensus view as the Reserve Bank of Australia grapples with an effective lower bound on its target cash rate. In fact, there are interest rate strategists who think that government bond yields are already pricing in the likelihood of Aussie QE.

Many of the folks who were dismissive of our May call are now expressing strong opinions on precisely what form the RBA’s QE will and will not take. Most of this analysis is misguided and overlooks several complications.