Personally I never bought into the notion that the government ever had “control” of the mortgage rates ever since the reserve bank was made independent. the suggestion, that it had such control was entirely imaginary. But the fact remains that we have experienced historically record low interest rates under the current government.
Labor last night unleashed a television campaign targeting the six interest rate rises under the Howard Government since the last election. The ad begins with black-and-white images of the Prime Minister from the 2004 election asking “Who do you trust to keep interest rates low?” before the sound of cash registers rings as six interest rate rise arrows punch across the screen.
The Liberal Party returned fire with a television campaign recycling the 2004 campaign on the high interest rates under Gough Whitlam, Bob Hawke and Paul Keating.
The ad features images of Labor deputy leader and workplace relations spokeswoman Julia Gillard, with a voiceover stating she is a “union fanatic”, and that Peter Garrett is an “environmental extremist”.
Mr Howard said Labor’s plan to scrap his Work Choices laws would trigger a wages blowout and put pressure on inflation.
“I believe very strongly now that if Mr Rudd is elected, then the upward pressure on both inflation and interest rates would be much greater than if we are elected,” he said.
And Australian Chamber of Commerce and Industry head Peter Hendy warned that Labor’s industrial relations changes, including its proposal to abolish Australian Workplace Agreements and the construction industry watchdog, could encourage unaffordable wage rises, fuelling inflation and interest rate increases. “Rolling back Work Choices will increase pressure on interest rates,” Mr Hendy said.
Look around the bloggosphere to what my friends on the left are saying a and you would think that government of the day actually controls the interest rates by decree and that the government has cruelly ramped up the interest rates to cynically extract more money from the pockets of Australian home owners. But my question to all of those inner city lefties who will have to find that extra cash each month is how many of you are suffering because you insisted on extending your mortgage to renovate? Or to pay for that overseas holiday? How many of you have that expensive gaming platform and the plasma TV? How many of you have that shiny new car (possibly a Prius) in the drive way bought on the never never ?
Some how I think that a lot of people who are suffering because of any rise in interest rates should sit down with their bank and credit card statements and truly think about the decisions that they have made and the toys and trinkets that they have signed on the dotted line for well before they start blaming the government, of any persuasion for their plight.
When I was growing up it was almost like a mantra in our house, roof and bills first, then your tucker, and the surplus was for leisure and pleasure. The reality is that these days no one seems to want to wait for anything they desire. The credit card is lord of all , but when you acknowledge that monarch don’t be so surprised when he wants his pound of flesh.
Cheers Comrades
8)


Iain this quite a silly appraisal of the situation I think.
It’s not only “inner city lefties” who borrow too much, it’s everyone. You’re average Australian is now deep deep in debt. It’s gotten ridiculous I wholely agree.
And it’s because your average aussie is so in debt that the Coalition made the argument that they would keep rates at record lows; a statement that’s landed them in deep shit because rates are largely out of their power. They deserve the attacks they’re recieving as it’s a situation of their making.
While I agree with the general principles you’ve written about, using this as an excuse to take potshots at “lefties” (which most of your posts do, probably so your silly friend MK will join you) is extremely naive. It’s not just inner-city dwellers who are pressured by interest rates, Iain, it’s everyone. Living in the country does not make you any more clever or more virtuous than those who don’t, which is a constant implication in your posts. Like you, I live in the bush and I can promise you that rate rises spark a lot of discussion and pain amongst people with mortgages (but lower salaries with which to service them.)
Mm you make my argument for me. I contend that easy credit is no great virtue and you seem to agree.
Although I do think that those who took the coalition argument that their management has enabled the interest rates to remain at historic lows to mean that the government would be actually CONTROILING interest rates deserve far more stick for their wilful ignorance in the face of the well known fact that the independent reserve bank does not dance to the government tune. The ALP deserves some approbation here as well for propagating the idea of government “control” of interest rates as well.
Heh. The way the reserve bank operates these days is nothing to write home about.
Mark I suppose that as someone who has for all intents and purposes paid of his mortgage I can be far more sanguine about this latest rise than those who are up to their eyeballs in debt. But the focus of my post is all about the financial decisions that we make and how we all, right, left city or country, have to ensure that we can live within our means, and allow ourselves a margin for the unforseen contingencies that we all face from time to time.
As for making “inner city lefties” the target of my barbs They are an example of the mindset and not the totality of the problem
Well some, but you must admit that they’re merely following the Coalition’s fallacy to its logical end.
Yes, reliance on debt is a national mindset, not an inner-city one. As always your follow-up comments are more moderate than your initial post.
The biggest problem with debt is RBA is printing too much money which makes credit all too easy to get.
Mark
I like to add a bit of extra bite to a post, life would be rather dull without a bit of spice don’t you think?
MM both sides of politics cherry pick the economic bon Motts that suit their political agendas don’t kid yourself that the ALP are any better than the coalition on that score.
Elijah
I know that the banks and other lenders seem to falling over themselves to offer easy credit. They do not seem to have the same concern about people’s ability to pay. I really don’t think that it is just a matter of how much money is printed though.
It is actually. The bank creates credit by creating money. I don’t pretend to know in the ins and outs of currency control (I’m still learning this in my spare time) but as with any commodity it is driven by supply and demand. As far as I understand it if there is a shortage of credit then interest rates go up. Interest is what you pay for “buying” the credit. So if there’s a glut of money supply in the economy you get low interest rates because it is available so freely. The reverse is true when there is a shortage. The value of money increases so interest rates go up.
No shit Iain, I’m just stating that in this case it wasn’t the ALP that initially argued that the government could deliver what they didn’t control.
Well it appears that I commited a Keynesian fallacy. Interest is actually the price of the time use the money for not the actual cost of money itself. Either way I still think my analysis stands that the problem is partially the fault of the RBA loose monetary policy.
Don’t beat yourself up Elijah, it’s a common mistake. ;-)
Well why does almost the entire economic commentariat in Oz not seem to grasp that?
From what I’ve read they most often do grasp it?
No. Most economists in the country still follow Keynes. He is, not to mince words, a moron.
I’m doubtful, but if you insist.
“a moron”?? Elijah, he did play a part in rescuing capitalism during the “experimental days”. “Moron” is a bit harsh don’t you think?
Hahaha! He helped rescue capitalism? He undid the work by adding light socialism to it. His principles of macroeconomics are so far removed from what actually happens at the micro level. The man basically said the government has to push up taxes and spend more during a recession!!! Of course that results in the BS that I thankfully missed during the 70s.
You’re looking at it the wrong way Elijah. When Keynes came on the scene capitalism appeared in its last days. Socialism was growing ever more popular, Keynes helped instill faith in capitalism again and help stop the drift to complete socialism. I’ve no doubt you disagreed with his public/private approach but “moron”?
He was a moron. Just because socialism was becoming popular it doesn’t change the facts that his ideas were wrong. The only thing I respect of his was his private ideas on share investment.
Once again you’ve demonstrated that you have a terrible problem with historical context.
ROFLMAO. I don’t care for the historical context of economics. Capitalism was already defined and working by the time he came around. Why do you think there’s a resurgence in the ideas of Hayek and Mises? Because they were right. The fact that Keynes surrendered to socialist fallacies doesn’t excuse anything.
Clearly you don’t. Capitalism was NOT “working”, at least is didn’t appear to be. There was an enormous crisis for capitalism at the time and that’s why people were looking favourably at other systems. Remember that Hayek’s “Road To Serfdom” was scorned upon on its release.
But hey, you say he was a “moron”, I think that’s harsh, so we differ, what’s new?
“at least is didn’t appear to be.”
That’s the truth of the matter. Douchebaggery of a massive scale.
“Remember that Hayek’s “Road To Serfdom” was scorned upon on its release.”
But who was proved right in the end…
“But hey, you say he was a “moron”, I think that’s harsh, so we differ, what’s new?”
I’m right again.
LOL. Your disingenuousness never ceases to amaze me. Don’t even try and dabble in history Elijah for all our sakes.
Well all things considered I did do 5 units of History for my HSC and got in the top 10%.
Wow! That would be why you’re clearly so proficient in historiography. ;-)
Exactly…