A harsh reality is dawning on central banks

Inadequate demand and low cash rates are weakening the potency of conventional monetary policy, leading some to suggest that central banks can no longer bear the burden of managing the economy on their own.

Structural shifts across the developed world, including Australia, have created a range of fresh challenges for conventional monetary policy. ‘Secular stagnation’ might sound like economic jargon, but inadequate demand and a shift towards a lower neutral real cash rate has important implications for economic growth and public policy.

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