It follows an address this week by RBA deputy governorGuy Debelle in which he outlined a string of options the bank was considering to help the economy out of recession.
Markets now expect the bank to take the official cash rate to 0.1 per cent,from 0.25 per cent,on October 6 just hours before Treasurer Josh Frydenberg releases the 2020-21 budget.
The bank is extending a line of credit worth up to $200 billion to commercial banks while buying more than $50 billion worth of government bonds on the secondary market to bring down the interest rates on this debt.
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But Mr Keating,who as treasurer saw its conversion to an independent central bank,said the RBA's own charter required it to focus on full employment and price stability.
He said with inflation so low"one would need a microscope"to find it,the bank should be buying"mountainous"amounts of public debt that would enable governments to properly fund an economic recovery.
"The bank should be explicitly supporting the government so the country does not experience a massive fall in employment – impacting particularly on younger workers – those who have already been obliged to wipe out their superannuation savings to support themselves,"he said inan opinion piece forThe Sydney Morning Herald andThe Age.