Australia’s money supply has surged over the year as the RBA has undertaken Quantitative Easing (QE), electronically printing new money to buy Australian and state government bonds and to lend to the banks (see the chart of M3, a measure of the money supply, below). Leading Australian market economist Michael Knox, Chief Economist and Director of Strategy at Morgans, wrote in his recent note QE as a long-term strategy:
Quantitative easing is new in Australia, so we tend to think of it as a short-term action that won’t be sustained for very long. Experiences in other countries though have been very different…In the US, quantitative easing was not a short-term strategy, but it was in practice a long-term strategy.
Last Friday afternoon, I interviewed Michael Knox about his note and our conversation is now available as my latest podcast episode Quantitative Easing as a long-term strategy with Michael Knox.
In Michael’s opinion, Aussie QE will last at least until 2024, and he expects it will become part of the RBA’s standard response to recessions. I hope you enjoy our conversation.