Australian interest rates and honest John's politik

Now when Australia saw an ad a fair while back with some politician telling them he'd "keep interest rates at record lows" they believed him.
But there's a little snag in this scenario.
Today we live in a global economy, international trade and what not has altered the economic envoironment to the point that it's basically a pendulum swinging on it's own, such is the nature of a capitalist economy.

What is rather suprising however, is the blind faith people put in the words of politicians when their actions indicate intentions of a completely different agenda.
Now everyone knows pollies lie, and yet still everyone votes based on these lies..


John Howard made a promise he could never keep, guaranteeing he'd keep interest rates lower than they were under labor when the fact is interest rates are quite frankly out of his control, a factor he forgets repeatedly, much like his memory interest rates under the Fraser Liberal gov. A visit to the Reserve Bank's historical interest rates page on its website reveals that the highest 90-day bank bill interest rate of 21.39 per cent occurred in April 1982 during the Fraser government with Mr Howard as treasurer...
The highest during the Hawke government was 19.56 per cent in December 1985. The highest under Paul Keating was 7.95 per cent in December 1994, which is only marginally higher than the highest under the Howard Government of 7.57 per cent in April 1996.

Howards habit of reverting to his economic stability arguement is becoming painfully thin.
What's even more infuriating is his own admission of just how little control he has over interest rates
People who thought Australia could reduce rates were crazy, Mr Howard said, because this would wreck Australia’s balance of payments and cause an economic crisis. He said that Australia could not have interest rates out of line with those in the United States because the world was economically interdependent and capital could flow from one country to another in a matter of minutes.



Whenever interest rates rose or fell sharply, Mr Howard explained it largely in terms of rises or falls in overseas rates.

But at other times Mr Howard argued (along with most money-market spokesmen) that the size of the Budget deficit or the size of the Public Sector Borrowing Requirement was the major influence over domestic interest rates.

Booms are invariably followed by busts and the bigger the boom, the bigger the bust, the housing market is no different.
Retiring baby boomers buying three investment properties each was the up slope...and now what?
The boom jacked prices up so much that first home buyers have no choice but to vote soley on interest rates.
Inflation is inevitable when rampant growth becomes the ends instead of the means to a stated objective.
Changes to the interest rate target are done in response to various market indicators in an attempt to forecast economic trends and in so doing keep the market on track towards achieving the defined inflation target and despite the uporoar of the last few days not everyone is reaching for the kleenex, while borrowers are worse off, savers are better off.
So eventually the impact of the higher interest rates take effect, spending slows, housing prices drop and first-home buyers are back in the game.


The modern economic pendulum swings on nothing more than speculation...such is the nature of the risky investments that perpetuate the cyclical capital flow that is apparently our objective.
John Howard is nothing more than a shrewd politician.
Poilitics is his life, but sadly his narrow minded focus on the political game itself has clouded his vision of the social impacts of the dodge the issue game he and the majority of pollies are so fond of playing, the one that puts them completely and utterly out of touch with society.

The only answer he can give to accusations that he lied when stating he could guarantee record low interest rates is to revert to his other standard mantras:
We have a 30-year low in unemployment. We have very strong business investment and consumers are very confident. (though how he knows of our confidene i am unsure)
and
housing interest rates now after the most recent increase this morning will still be lower than they were at any time in the 13 years of the Hawke and Keating governments when famously housing interest rates, or should I say infamously, hit 17 per cent.

Peter Costello was slightly more realistic about the situation:
The fact is that this decision will make household budgets tighter, but its important that we make sure that we keep economic growth continuing in this country
Though yet again there is no specific reason for economic growth, just that it's good.

The ironic thing is those most likely to suffer are the greedy and gullible get-rich-quick merchants who bought negatively geared investment properties far too late when the market was close to its peak, and people who took out "low doc" loans they couldn't repay from dubious non-bank lenders.

Is it any suprise that these are the people who took John Howard at his word without giving a thought to what he was actually saying?

Today Howard is attending a cabinet meeting that will discuss making energy and climate change the theme of next year's Asia-Pacific Economic Co-operation jamboree in Sydney.

The symbolism of having the leaders of the United States, China and other Asia-Pacific nations in Sydney talking about environmentally and economically sustainable energy - including nuclear - weeks before Howard is expected to call the election speaks for itself.