KNEEN The RBA has signalled it believes there is spare capacity in the Australian economy, having recently revised down its view of full employment to 4.5 per cent from 5 per cent. Inflation has also been sitting below its 2-3 per cent target for a considerable period.

With this in mind, I don’t think the bearish tone is being overstated. The RBA could cut again soon and will perhaps get to a sub-1 per cent cash rate this year.

DAY I’ve not been very impressed with the RBA’s actions. It goes back to the danger of central banks extending the cycle and it also looks like what the US Federal Reserve has done this year – the RBA has boxed itself in. The market has told the central bank to cut rates, so it has.

The RBA still seems very obsessed with inflation and the only thing it has in response is interest rates – and possibly QE down the road. It seems to be a big call to make when growth is fine, the property market is stabilising and the iron-ore price has been strong.

In other words, things look okay but the RBA is behaving as if there is a huge recession around the corner. I just don’t see that right now. Yes, inflation is a bit low and underemployment is a bit high. But it doesn’t seem terrible.

Let’s say China is really having big difficulties in 18 months to two years. There won’t be anything left to tackle this. It seems too much, too soon.

There’s also the risk of restoking an asset-price bubble. What the RBA has done to stabilise the property market – by tightening up mortgage rules – has been impressive. For some reason the central bank seems to want to unwind some of this because it’s a bit worried about growth and inflation.

KNEEN I think we are probably getting ahead of ourselves on the QE front. To be fair, the market has been talking about this for some time, likely going back to the RBA signalling its belief that rates become ineffective at a certain level.

But we are talking about the RBA getting below a 1 per cent cash rate. If these rate cuts to get to 1 per cent are ineffective, that’s when QE should realistically come on the agenda.

BUTCHER The big difference is that the RBNZ is no longer out of synch with global market policy. The RBNZ learned its lesson that if it is out of step it risks an unwelcome currency reaction.

The RBNZ appears more relaxed when it comes to monetary-policy settings and it also seems to be comfortable with the macro backdrop. Inflation is still not threatening the mid-point of the range. The global impetus is for softer monetary-policy settings and the RBNZ is not going to stand in the way. My view is that these low interest rates and a supportive currency will remain.

SORENSEN The last cut appeared to be the RBNZ getting ahead of the curve.

BUTCHER This is probably the style of the new governor – being more proactive and more content to put his views out there – coming into play.

SEVERINO I agree that the currency is paramount. Given the macro environment, the RBNZ governor really can’t afford for the currency to be too strong.