Inflation

According to RBA statistics, base monetary inflation has been runninng at 6.7% per year for the last 7 years, while broad monetary inflation has been running at 13.1% per year. The difference between these is the rate of increase of leverage within the economy - and the former number is the rate of printing. That printing may, in the case of Australia, be justified by population growth and the view that the total productive output of the country has truly been increasing. The latter number is the effective real rate of increase in money supply, for determining the nominal cost of everything.

In the past year, however, base monetary inflation has been running at 13.3%, while broad monetary inflation ran at 13.8%. This shows a few things - the economy has not been deleveraging and the RBA has been printing very hard to keep inflation going and prevent deflation from showing up anywhere.

On a related note, total credit growth has gone from 15.5% YoY 2 years ago to 3.4% YoY now, of which housing has gone from 12.9% to 7.1%, personal credit from 16.1% to -7.0% and business credit from 19.1% to 0.5%. We could go into 2nd derivatives, but the point is fairly clear - the credit train has almost stopped.

Of course, this is nothing like the US inflation - 98.4% inflation of the base in the last year and 8.8% broad inflation, demonstrating massive economic deleveraging and/or a Liquidity Trap.

As a final thought, an increase in inflation improves business and prosperity for everyone. At least according to the government, anyway. History shows that Roosevelt's inflation and New Deal didn't work so well.