Interest Rates
During the previous federal election campaign the incumbent Liberal Party of Australia based their campaign upon the premise that “interest rates will always be lower under a Liberal government.” Here’s John Howard saying exactly that in an interview with the ABC:
JOHN HOWARD: However you look at it interest rates will always be lower under a Coalition Government.
CATHERINE MCGRATH: But they’re going up as the Reserve Banks says…
JOHN HOWARD: They will also be lower under a Coalition Government. That is the guarantee I give.
We’ve had a couple of rate rises since the last election, and it seems a lot of people chose to interpret Howard’s promise as “interest rates will never rise under a Liberal government”. Ignoring that, it’s clearly a dubious claim.
Here’s a little diagram I knocked up showing how the interests have panned out since the 1960s, marked up by government (blue for the Liberal Party, red for the Australian Labor Party):
So we can establish some facts based on that data:
- Interest rates under the current Liberal government are lower than they were for the entire reign of the previous Labor government.
- Interest rates under the current Liberal government are lower than they were for the entire reign of the previous Liberal government too.
- The highest interest rates we’ve ever had (in the late 80s) were under a Labor government.
- They got almost as high in the early 80s under the previous Liberal government when John Howard was Treasurer.
That’s all well and good, but it certainly doesn’t verify the unverifiable — that interest rates would have been higher now if the ALP had won at the last election. We’ve got no way of knowing what that alternate reality would have been like, and none of the historical data we’ve got can confirm or deny Howard’s claims. Even though he presented them as promises it’s clear they’re just unverifiable opinions and claims — nothing more.
I know that it’s the Reserve Bank that sets interest rates, and that there’s certainly lots of other influences on the Reeserve Bank’s decision beyond things that government can control, but it really doesn’t matter: until we can explore alternate universes they’re empty statements.
Now that I’ve laid out the facts and logic clearly I expect that I won’t hear about it anymore on TV. Thank you.
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October 4th, 2007 at 9:40 pm
Maybe Aus should run two concurrent governments, and the residents can use their mobile phones every friday night to choose who gets to make the rules next week
What I actually find interesting is that borrowing money in the UK is much cheaper than in Aus - surely Australia’s inflation hasn’t been that high, for that long (the usual gov excuse for high interest rates)
October 5th, 2007 at 10:51 am
The pound sterling is a much stronger currency than the AU$ — today US$1 = $AU1.12 = £0.49 — that probably has a lot to do with how cheaply the UK banks can lend out money.
On the bright side (for us in Australia) the AU$ is getting stronger and stronger by the day which encourages the Reserve Bank to keep the official interest rates down. That’s at least partially attributable to our neoliberal government’s fiscal attitude — the desire to maintain a big budget surplus (so that lends some weight to the whole “a Howard government will have lower interest rates” argument).
I think what mostly works against us is that Australians are very willing to borrow heavily to have the things that we want (houses, cars, TVs, etc) particularly in places like Western Australia where there’s a mining boom on and lots of cash on the ground. That forces the Reserve Bank to put the rates up to slow us down. Clearly that’s *not* under the control of any government and shows how bogus Howard’s claims are.
November 19th, 2007 at 9:17 am
A similar discussion has been occurring on one of the stats blogs, if you’re interested in a more ‘number cruncher’ analysis of it all. (Which you may well not be, but it reminded me of your post anyway…)
http://blogs.mbs.edu/fishing-in-the-bay/?p=177
November 19th, 2007 at 5:27 pm
Crikey that was pretty mathy!
Whatever the numbers say, I think Labor is going to win this weekend unfortunately.