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Interest rates up

05 Feb

We knew it would happen, and know it will happen again. At the moment even the most one-eyed supporter of the Howard/Costello government would have to concede this would have happened even if TEH TEAM was still on the job. A new government that has been in place for a mere two months can’t cop the blame for this rise, nor credit if for some reason the Reserve Bank had not raised rates.

Perhaps this pre-election post is right after all: The treasurer is mainly pretence. There I cite Andrew Charlton:

Addressing the media, Howard summed it all up: “This election, more than anything, is an opportunity for people to make a judgement about whether they want to have higher interest rates under Labor or re-elect a government that will always deliver lower interest rates than the Labor Party.”

Interest rates were not only central to the 2004 election. They have been a recurring theme of the past 11 years of Coalition government. Even more importantly, it is almost certain that interest rates will be a major theme, perhaps the major theme, of the next federal election campaign. The story Howard and Costello will tell the Australian people will go, roughly speaking, like this. Under Labor interest rates are always unacceptably high. Under the Coalition they have been and will remain low. They will suggest to the Australian people that interest rates are controlled by governments and directly linked to federal budget deficits and surpluses. As no part of this story is actually true, the next election campaign will be conducted on the basis of a series of seriously misleading or straightforwardly false Howard-Costello claims.

Ross Gittins has also on a number of occasions drawn attention to the limited power of governments, whoever they are, in matters like this.

Surprisingly, a central question in the third last week of the election campaign is: what’s the role of the federal treasurer? If you think it’s to manage the national economy, that’s what you’re meant to think. But although the politicians on both sides want you to believe it, it hasn’t been true for a long time.

Consider the view of a prominent business economist, Rory Robertson, of Macquarie Bank. He says the job of any modern treasurer, Liberal or Labor, is not so much to manage the economy as to pretend to manage the economy.

The emergence of something like a Hawke-Keating Accord may be one useful approach, and with luck that may happen.

Terrible thought, but perhaps the government should reconsider its election promises, especially the ones they me-too-ed from Howard and Costello… I don’t think they will though.

RELATED

Why the RBA should not raise interest rates on Club Troppo.

LATER

Brendan Nelson on the 7.30 Report was bloody hopeless, even patently dishonest*!  The sooner the Libs move the leader hat to the correct head the better. They’ll find that leader waiting somewhere not far from Bondi Beach. Mind you, at the moment he is also running with the specious party line on the interest rate rise.

* It is the reluctance on his part — and it would appear equally on his leadership rival’s part — to be frank about where the interest rate rise came from that I see as dishonest. You may call it spin, and say “What would you expect?” I just don’t think trotting out such a ludicrous line is good enough. To be fairer to Brendan, though, he was somewhat better when interviewed on Radio National Breakfast this morning. His determination not to speak in advance of consulting his colleagues may be commendable when compared with the leadership style of John Howard. We shall see. BTW, I think it is clear Brendan now will back the Apology, or wants to.



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2 responses to “Interest rates up

  1. loudhouse

    February 6, 2008 at 3:00 am

    Why is it that the US (and the UK is considering it) has dropped interest rates whilst Australia has increased them. I’m confused. I thought, considering how dependent it is on the US market, Australia would follow suit with the US and the UK.

     
  2. ninglun

    February 6, 2008 at 10:21 am

    Thanks for the comment, and I see you are in the UK. Here conditions are as much (even more?) determined by our very strong resources boom and our links to China and the Asian markets. Hence, we are told, the different approach from the USA and the UK. The plus side has been that our situation has cushioned us against some of the fallout from the US economic crisis.

     
 
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