Liam Dann: Economic centre ground shifts left

Monetary policy - the silver bullet for economic woes - is at the limits of its power. Photo / Michael Craig

This economic cycle of low inflation and low wage growth is creating asset bubbles, exacerbating inequality and driving political instability.

The lack of inflation is killing wage growth. Businesses are making gains on costs but reluctant to expand as sales margins fall.

Meanwhile, the cure for all this, low interest rates, comes with the side effect of pushing stored wealth into property and shares.

That drives the inequality as those without access to capital are left behind. It also adds the risk of bubbles bursting and causing another crisis.

Monetary policy - the silver bullet for economic woes of the past 30 years - is at the limits of its power.

These aren't incendiary insights. Not these days.

In fact what's really amazing is the extent to which they have entered the mainstream of economic thinking.

Whether its bank economists, stock brokers and fund managers, there are now few voices in the traditionally right leaning financial world prepared to argue that the system hasn't broken down to some extent.

It brought it all home hearing Reserve Bank Governor Graeme Wheeler make similar observations last week.

It isn't his brief to get involved in domestic politics so Wheeler is more comfortable talking about political dimensions in relation to the US, Europe and UK.