The current debate on Australian monetary policy is misdirected. Interest rates are abnormally low because the US Federal Reserve has pushed them down through excess liquidity and sustained quantitative easing.

All other developed countries (including Australia) have been forced to match these low rates in order to avoid a damaging loss of international competitiveness through an overvalued exchange rate. With policy already so accommodative, further easing would be as ineffective as doubling the prescribed dose of medicine.