RBA Deputy Governor Debelle notes that "while...>

RBA: RBA Deputy Governor Debelle notes that "while the bond purchases by the RBA

increase liquidity in the system, I do not see this posing any risk of

generating excessively high inflation in the foreseeable future. Indeed, the

opposite seems to be the more likely challenge in the current economic climate,

that is, that inflation will remain below the RBA's target. Nor do I see any

issue at all with the capacity of the Government to repay the bonds it has

issued. Firstly, even with the increased issuance to fund the fiscal stimulus,

the stock of government debt relative to the size of the Australian economy

remains low. Secondly, the Government is borrowing at yields that are very low

historically. Importantly, the yields on government debt are considerably below

the long-run growth rate of the economy; that is, r is less than g. While ever

this remains the case, as Olivier Blanchard has highlighted, there are no

concerns at all about fiscal sustainability from increased debt issuance. This

is because growth in the economy will work to lower government debt as a share

of nominal GDP."