In earlier eras, one could have predicted with some confidence that this type of monetary stimulus would have created a boom in economic activity and subsequently a substantial lift in inflation. Yet, today, many parts of the world continue to operate with considerable spare capacity, inflation rates are low almost everywhere and inflation expectations have generally declined, not increased.
So this afternoon, I would like to talk a little about these very unusual times. I will begin by showing a few graphs that summarise the current global monetary environment. I would then like to explore some of the possible reasons why we are in this environment before addressing some of the implications of all this for Australia.