Saving to buy into the great Australian dream is now the exception rather than the rule. Sadly, it most likely will be this housing bubble, rather than his handling of the GFC, that will define Glenn Stevens' legacy at the Reserve Bank, writes Ian Verrender.

It could all have been so different, had the tumult of last September never occurred.

Missing in this morning's mail was the Royal summons from Buckingham Palace. Gone was the prospect of Her Majesty, sabre in her right hand, tapping the shoulders of the wiry monetary whizz from Down Under.

Never will She pronounce: "Arise, Sir Glenn of Sylvania, for services to macroeconomic policy and for uplifting the pay scales of senior Australian bureaucrats."

Captain Glenn, instead, forever will remain merely a former Governor of the Reserve Bank of Australia, his future as an aristocrat shattered by Malcolm Turnbull who junked his predecessor's captain's call within days of his own ascension to the throne.

After a decade of lording it over the economy, Captain Glenn Stevens AC, still has a few months of absolute rule in which to shape the future of this fair land before shifting course into a well paid position in the private sector. (We hear the banks are having difficulty recruiting suitably qualified directors.)

The amateur aviator has ruffled feathers in recent weeks. In particular, his call last month to cut interest rates on the very day Scott Morrison was delivering his first budget has divided the pollies and set economists tearing strips off one another.

For, just a few weeks after his decision to slice another wedge from Australian interest rates, the national accounts threw up a surprisingly strong annual growth of 3.1 per cent in the March quarter Gross Domestic Product.

Combine that with stronger than expected employment data and soaring housing prices, and many commentators began questioning whether Stevens had pulled the trigger too quickly.

In reality, the RBA had no choice. And despite the sudden withdrawal of any "easing bias" - hints that it may continue cutting - in last week's decision to keep rates on hold, our central bank will have no option other than to further hack away at rates before the year is out.

Global interest rates are now the lowest in recorded history, or at least since the Bronze Age, whichever is your preferred measure.

A reaction to the near calamity of the financial crisis of 2008, rates have headed into negative territory in Europe and Japan and are marginally above zero in most of the developed world.

It is a bold experiment that so far has failed to deliver and has the potential to fail spectacularly. Global debt has exploded and asset values have soared. But the chasm between rich and poor has grown wider while global economic growth continues to disappoint.

The point is, we don't exist in isolation.

The RBA is being dragged into this low interest rate race as it desperately attempts to weaken the currency and ensure our economy, which is facing serious headwinds, remains competitive.

While the March quarter GDP figures appeared to be spectacularly strong, they reflect our external trade position and not what is happening in the economy. Mostly, they are a measure of the amount we are producing, not how much we are earning.

On that score, Australia is going backwards, with Gross National Income sliding 1.3 per cent. On a per capita basis, the position is even worse, as the population continues to grow.

What really spooked Stevens and his RBA compadres last month was that prices went into reverse with a 0.6 per cent decline in the March quarter. Then there are the terms of trade - the difference between the prices we receive for our exports compared to what we pay for imports - which fell 1.9 per cent in March and 11.5 per cent through the year.

Even the jobs numbers, while better than anticipated, belie the fact that most of the employment growth, particularly since 2012 has been in casual and part-time work. Since the beginning of 2013, unemployment has rising from 5.5 per cent to 5.7 per cent after pushing above 6 per cent last year.

Underemployment, however, has continued to rise from 7.3 per cent to about 8.5 per cent earlier this year.

With the downturn in mining continuing, and the end of the construction phase in LNG nearing, more jobs are expected to be lost while manufacturing unemployment is expected to soar later this year as the automotive industry begins its shutdown in earnest.

Add to that the anticipated slowdown in east coast housing construction, and any new government promising jobs growth in the upcoming term could end up with serious credibility problems.

For the past two years, a frustrated Stevens has sounded warnings that central banks could only do so much to spur economic growth.

Interest rate cuts so far have done little to spur investment growth. And while the Australian dollar has dropped about 40 per cent from its 2012 peak, it is still uncomfortably high for the RBA, particularly given a 1.75 per cent cash rate.

It was a different story at the height of the financial crisis. Back then, the RBA took a scythe to rates, lopping four percentage points from official cash rates, when they plunged from 7.25 per cent in September 2008 to 3.25 per cent the following February.

During that period, the dollar plunged from about parity to about US60c, delivering an instant boost to our global competitiveness just as China's massive stimulus fired up demand for resources.

This time around, the interest rate cuts merely have added fuel to a Sydney and Melbourne real estate frenzy that has only served to boost our position as world leaders on the household indebtedness tables.

There's no doubt Stevens played a deft hand at the height of the financial crisis, steering the economy clear of trouble, after a stellar performance in keeping inflation in check during the mining boom.

But his strategy since 2012 of deliberately firing up an already dangerously inflated east coast housing bubble to soften the blow from the unwinding of the mining boom, has placed the banking system and the economy in harm's way.

In the process, the future wealth of generations of young Australians now will be determined by whether they inherit real estate from their parents. Saving to buy into the great Australian dream will be the exception rather than the rule.

Until last year, Stevens refused point blank to curtail housing lending, arguing macro-prudential policies were ineffective. While his position has now changed, many argue it was too little, too late.

Unfortunately, it most likely will be the housing bubble, rather than the financial crisis, that will define Glenn Stevens' legacy.

Ian Verrender is the ABC's business editor and writes a weekly column for The Drum.