Spinning the rate rise
Decided on Melbourne Cup day but announced the morning after, could this be the hike that stops the nation re-electing John Winston Howard?
So widely trailed has been the since the last election that Liberal Party strategists will no doubt be hoping Mr Howard鈥檚 famous 鈥渂attlers鈥 in the 鈥渕ortgage belt鈥 have already become anaesthetised to the pain.
Better still, some believe that the prime minister can perform political ju-jitsu and turn what should be a Labor strength into a vulnerability. One Liberal MP, Cameron Thompson, made the mistake of stating that publicly, saying an interest rate rise from the Reserve Bank of Australia, the country鈥檚 autonomous central bank, would be a 鈥減ositive for the government鈥 because it would focus voter attention on the economy, supposedly its main vote-winning selling point.
As the government mounts its counterattack, we will be hearing the figure 17% being bandied around: the fear-inducing cost of borrowing under the last Labor government. The opposition will respond by reminding voters that when John Howard was treasurer in the Fraser government it was a whopping 22%.
For the record, interest rates have been lower under Mr Howard (an average of 5.39%) than they were during the Hawke/Keating years (11.31%).
Knowing an increase in the cost of borrowing was all but inevitable given the inflationary pressures in the Australian economy, Mr Howard and Peter Costello have for weeks been busy preparing the groundwork. On matters economic, Treasurer Costello has taken to expressing himself in almost apocalyptic terms, warning of a 鈥渇inancial tsunami鈥 engulfing global markets if China floats its currency. And what of the in America, and the panic it could easily engender?
The message is emphatic, if a little fraught: at a time of economic turbulence and volatility you need a steady hand on the tiller of the Good Ship Australia. Trouble is, this change-averse electorate is already in a mutinous mood.
Kevin Rudd faces a different challenge. For him, this has to be a gloat-free day, and he has to avoid the public appearance of taking delight in the government鈥檚 and home owners鈥 misfortune. He launched his campaign on the issue of housing affordability. No doubt he was anticipating today鈥檚 rise, and hoping to turn the 鈥渕ortgage belt鈥 into Rudd country.
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I find it amusing that during the previous election campaign Howard used high interest rates as an example of the poor economic management of previous Labor governments. Now that interest rates are going up under his leadership, he and his right-wing buddies in the media are telling us that interest rates are rising because of his prudent economic management!
Good contribution by Nick this morning.
The Australian Reserve Bank ALWAYS publishes its interest status decisions on the first Wednesday of each month so the Melbourne Cup has actually nothing to do with it.
Interesting is that John Howard was published on Yahoo/AAP news this last weekend as having said he considered "a further increase in rates inevitable".
As Nick correctly pointed out,
a) John Howard and his party have nothing to say in the decision to raise or lower interest rates
b) Ironically, it was the Liberals (Howard's party) that gave the Reserve Bank full independence
c) It is not only not a good thing but a very bad thing that this rise should come within weeks of elections and is quite definitely playing into the hands of any and all other parties
Time to go Jo
Catchyalayda matey
Gari
Why are we being distracted with this interest-rates-are-bad crap? More importantly, why isn't Labor showing us that with lower interest rates under Howard, we are worse off?
Take these two scenarios.
One:
Interest rates 17%
Average home to buy $200,000
Average workers wage $450
Number of people in family working full time to pay this debt 1
Two:
Average interest rate 6%
Average home to buy $600,000
Average workers wage $600
Average people in family working full time to pay this debt 2
In the first scenario, with interest rates around 17% an average Aussie could afford to pay off a home and still invest a small sum in a bank, credit union or building society and be able to buy a car or other comodities without having to borrow. Thats how it used to be before Howard.
In the second scenario it is impossible to save or invest any money, and most goods can only be bought on credit. That is how it is now under howard.
We now have a private debt (that is non Government debt) close to trillions of dollars caused by people buying on the 'buy now and pay later' plans that many of them can't afford. And whose money are they borrowing? Chinese and Japanese monies.
This is what the Liberal Nationals call good financial management.
Anyone that believes this is good financial management is either a died-in-the-wool conservative, an import that doesn't know Australian politics or are just plain stupid.
If ever a man hoisted himself by his own petard it is John Howard. Before the last election he used the bogey of interest rates to frighten the electorate into voting for the Liberal-National coalition. The Australian electorate swallowed the fiction that his party had some kind of direct influence on keeping interst raters down. He now has to face the corollary that his party is therefore to blame if interest rates go up. Serves him right.
Of course, Labor are quoting 22% as the interest rate when Howard was treasurer - however this is not the regular interest rate that homebuyers see.
The highest interest rate under the Fraser government was actually 13.5% - lower than Labor's 22%.