I think the problem with Corby's system is that it turns it into a straight-up competition against everybody else, rather than against your past self, and I think exams should be more about the second than the first. The fact that other people are sitting this exam should have no bearing on my ability to perform well at it. Imagine a student unexpectedly scoring 85% having worked really hard, but unfortunately 10,000 other students scored 86%, so despite all that they get a B rather than an A. Why even have the pretence of grades in this system? Just issue everybody a ranking instead. "Congratulations, you were the 17,285th best student at this exam!"
In the present system, grade inflation is clearly also a problem, but it's not entirely impossible that this is partly because teachers get better at teaching the material, pupils get access to more resources (past papers etc), and so on, so it's also possible that grade inflation is a reflection of people becoming better at the exam.