Indeed the last interest rate rise was in 2010, almost 5 years ago. Many people have seemingly forgotten about the risk of higher interest rates. The RBA, by passively sitting by and not cutting enough, not hiking and then not cutting have failed to use monetary policy as a tool for managing demand and inflation over the cycle. It is like sitting in a car and rolling down a hill in neutral - neither accelerating nor breaking as needed.
Which leads to the problems that will be evident this week. Runaway house prices, weak GDP growth and inflation at the bottom of the target range demand high, no low, no high, no low interest rates. Here is the RBA’s dilemma.