Within the RBA, the staff run a number of standard “workhorse” models based on historical relationships to help explain and forecast inflation.2 While these models are all consistent with a pick-up, and then moderation, in inflation, they have difficulty explaining the amplitude of the recent cycle.
14 Consumer credit contracted in the 1990-91 recession but has remained broadly flat in the current downturn, albeit with a slight downward drift in more recent quarters. For home mortgages, shown in the top-left panel, lending expanded similarly in the lead up to both the 1990 and the 2007 business cycle peaks.