Former Reserve Bank of Australia board member Warwick McKibbin says the world's central banks should switch to a system of using official interest rates to target nominal income growth to ensure huge household and government debt burdens are unwound safely.

In what would be a radical departure from a system that has served since the mid-1990s to curb the rampant inflation of an earlier generation, Professor Mckibbin argues strict inflation targeting has run its course as credible policy making tool.