Pollies and interest rates: how low can they go?

Tim says:

07:50am | 05/10/12

Oh please.
The same people crowing about Howard and the Libs ‘low interest rates’ are the same ones saying now that Labor has nothing to do with them being low.

They’re equally imbecilic, if not more so on the Libs part for continuing their lie for longer.

TimB says:

08:54am | 05/10/12

“The same people crowing about Howard and the Libs ‘low interest rates’ are the same ones saying now that Labor has nothing to do with them being low.”

Some of them are, yes. I already pointed out that Howard’s boast was silly.

Giving Howard credit for keeping interest rates ‘low’ is dumb. And yes anyone turning around after saying that, and pointing out that Swan has nothing to do with the interest rates is a hypocrite. That doesn’t change the fact that the latter statement is still correct.

Hypocrisy doesn’t negate truth.

Borderer says:

09:09am | 05/10/12

People and the economy want stable interest rates, whatever they are. It means the economy is not overheating or slumping, people can plan their houshold budgets, not lose their jobs or have house prices rocket.
A governments role is to promote stability.

Chris L says:

09:30am | 05/10/12

I have to admit I’m guilty of this. I do realise that interest rates are independant of government, but given how loudly Howard and his followers claimed otherwise I take a devious delight in bringing the subject up.

Of course Swann is foolish to follow in these footsteps. I have to wonder, if the Coalition jumped off a cliff would Labor do so to?

AdamC says:

09:37am | 05/10/12

The nuance to the argument, usually missed by the Labor spambots, is that the Howard years managed to combine relatively low interest rates with robust growth and falling unemployment.

I put that trend down to benign economic times, an expansion in access to debt funding and the reform dividend from the Hawke-Keating-Howard/Costello period of structural changes. Others may contend the mining boom had something to do with it, but resources prices started to seriously kick up only in 2005/06, towards the tail end of the Howard years.

maria says:

09:43am | 05/10/12

People and the economy
People and DEMOCRACY

Where the bloody hell are they?

The mob and the mafiacracy they are one and getting stronger.

dovif says:

09:45am | 05/10/12

Tim

The government have everything to do with interest rate. The government’s job is to ensure the business of the country can prefer in the best environment, therefore creating wealth and jobs for all Australians. Howard did that with the Waterfront reform and the removal of unions in the mining sector (both opposed by the ALP). Australia had benefited enormously from that.

As a result of that, alot of Australian has jobs, and Australians propered, what he did wrong was to not ensure there was more workers coming into Australia and Australia had all the resources to minimise the overheating of the economy, the end result was that interest rate rose.

Likewise, the ALP has a lot to do with the economy, their excessive stimulus package, against the advise of the RBA drove up interest rate. We were the only developed country to raise rate in 2009-2010. Which was directly caused by overspending and the accumulation of debt, which overheated the economy (and cause unneccessary large debt for all Australian)

So while interest rate are normally driven by international forces (ie 9/11, GFC, wall st crash) The government also need to planned to ensure the economy is prevented from overheating, which the Howard government (near its end) and the Gillard Government did a horrible jobs of

Tim says:

10:32am | 05/10/12

TimB,
of course Swan has very little influence on them, but you’ve got to be even handed and say both parties are equally guilty of this sham.

AdamC,
of course Howard and Costello performed well on the back of their own and previous reforms. However, you could say that in the mid 2000’s Howard actively helped the rise in interest rates through increased government spending and handouts, when the more prudent thing would have been to reduce it and build up a much higher surplus. The political instead of economic reality of the time ruled his decisions.

Dovif,
I would suggest the way the economy has performed in tough times shows that we’ve been relatively well governed with respect to the economy. Are there improvements that can be made, of course there are.
Are Labor the horrible economic managers Liberal supporters make out they are? No.
Are the Liberals the economic saviors the Liberal supporters make out they are? No.

Both parties struggle in that they have to often rule with politics always in mind. It prevents any decent reforms because the electorate is too stupid to see the big picture.

dovif says:

11:02am | 05/10/12

Tim

We are the only developed country that raise rates in 2009-2010 and we raised it by 2%. The cause of that was the excessive stimulus package that overheated the economy and cause enormous debt. You can look up the interest rate in other similar (resource rich economies) ie Brazil, Canada, South Aftica to see that they did not raise interest rate (cause was not mining boom) or you can see the interest rate in US or UK to see that developed nations did not have overheated economies

When the Government is the cause of overspending and interest rate rises (2% n Australia against the rest of the world), that does make the government a bad economic manager.

Liberals were not without sin as I said, the tax cut carried out by the Liberals and the ALP in 2006-2009 also overheated the economy, and helped drove interest rate up to 8%

TimB says:

11:02am | 05/10/12

“TimB,of course Swan has very little influence on them, but you’ve got to be even handed and say both parties are equally guilty of this sham.”

Which, if you had read my posts, is exactly what I’ve been doing.

Tim says:

12:01pm | 05/10/12

TimB,
“But it’s not half as silly as those who give credit to Swan for interest rates slowly”.

It’s fully as silly, which was my point.

Dovif,
It’s easy to say that with 20/20 hindsight but If you fully remember the economic climate at the time, there were people telling the government to spend much more and people telling them to spend much less.

In the wash up they probably went $20-30 billion too much, but I’d hardly crucify them for it because of the situation they were in.

TimB says:

12:53pm | 05/10/12

Tim in and of itself those things are equal. But those people (and Swan) are also using those interest rate movements as indication of a good economy. That’s where the extra silliness comes from.

Trebby says:

01:08pm | 05/10/12

Timbo,

Howard is the one who claimed responsibility for interest rates in 2004. Did you complain about it then? And then lied to the Australian people that they would be kept at record lows

TimB says:

01:30pm | 05/10/12

“Howard is the one who claimed responsibility for interest rates in 2004. Did you complain about it then? “

I was 19. I didn’t care then.

And I already pointed out above that I think his comments were silly.

Babylon says:

01:52pm | 05/10/12

If Swan had of Regulated the Banks properly, as is his job, then the large part of the RBA cuts would have to be given to us!

Before the release of the 2011 Budget, San told us how he was including incentives to create 500,000 jobs and reduce unemployment to 4.5%.

Result 5.3%

What happened to the Jobs? Carbon taxed out of existence of course.

Tom says:

02:47pm | 05/10/12

Trebby, Tim and all the ones trying to pin down TimB to a gotcha moment.. He already said he thought Howard’s interest rate statement was stupid but he was only 19 at the time.

Howard’s virtues consisted of his Mr Bumblebum TV performances which constantly confounded the media attack dogs of the day.

I was older than TimB and thought it was a stupid statement by Howard although I was a supporter of the government at the time (not necessarily Howard). Perhaps that was the moment when publicly Howard “jumped the shark”?

Tim says:

03:16pm | 05/10/12

Tom,
where’s the attempted “Gotcha”?

I simply wanted clarification, it’s been given.

marley says:

07:39am | 05/10/12

@acotrel - yeah, Roosevelt was personally responsible for the Germans deciding to invade Poland, for the French and British deciding to fight him, and for the Japanese invading China, Indochina and then bombing Pearl Harbour.  Right.  Geesh.

TimB says:

07:54am | 05/10/12

Last time I checked, we had a world war because a psychotic dictator got his hands on the reigns of power in Germany and started invading his neighours. Then the Americans came in because the Japanese attacked Pearl Harbour.

But by all means put the blame on Roosevelt and his spending policies. You must have read different history books to me.

nihonin says:

08:13am | 05/10/12

You really have lost it, haven’t you acotrel.  That bucket beside you must surely need emptying by now.

Alfie says:

08:15am | 05/10/12

@acotrel

You may wonder why people don’t take you seriously.

maria says:

09:47am | 05/10/12

@Alfie
How can you be serious when you are irrelevant under the thump of the mob?

Testfest says:

10:05am | 05/10/12

Acotrel,

Good lord man. An American president’s budget policy triggered WW2?

You’re really going to have to explain the logic that led you to this startling conclusion.

St. Michael says:

11:51am | 05/10/12

Acotrel, the premise of your argument is that what Roosevelt was doing during the"New Deal” was actually constructive.

It’s a flawed premise.  Henry Morgenthau, FDR’s own secretary of the Treasury, said on May 9, 1939 to the House Ways and Means Committee:

“We have tried spending money. We are spending more than we have ever spent before and it does not work.  I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises.  I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot!”

Bear in mind that’s after seven years of the New Deal.  FDR had tried everything from seizing gold to wage and price controls.  None of it worked; unemployment was actually higher in 1939 than it was in 1931.  FDR’s New Deal (part 1 and part 2) made things worse, not better.

Esteban says:

02:54pm | 05/10/12

acotrel is on the right sort of track here.

The depression caused the USA to withdraw from world affairs and resume a stronger isolationist position.

With less USA involvement in global affairs those terribly sophisticated Europeans fell back into a state of war 21 years after the war to end all wars. (incidently WW1 broke out when the isolationist policy of the USA was at its strogest)

By the way, does anyone worry that we have had a GFC and the USA is once again withdrawing from global affairs commencing in the middle East?

People love to hate the big bad policeman and call for less involvement but be carefull what you wish for.

Back on acotrel’s point there can be no doubt that the depression was finally broken by war expenditure.

That does not mean that the USA orchestrated WW2 to break the depression if that is your implication acotrel?

St. Michael says:

03:33pm | 05/10/12

@ Esteban: there’s probably a bit of chicken-and-egg going on here, but was it isolationism that caused the Depression, or the other way round?

Remember, the Smoot-Hawley Tariff Act was Hoover’s decision.  That act was a populist response to foreign imports into American markets, and it’s what set off the trade war that led into the Depression.  That being so, you’d have to conclude that America disliking the rest of the world predated the Depression.  They were late to the party in World War One, too—again, if I remember right, because they didn’t want to get involved in the Old World’s wars.

Pearl Harbor changed the US electorate’s mind on war, obviously, but FDR was already pouring money into World War 2 via the Lend Lease program to Britain.

Esteban says:

04:18pm | 05/10/12

St.Michael. Not withstanding what you have posted the curcumstances were different in the depression to other down turns.

What defined the depression was that the banking system collapsed. Something like 10,000 banks across the USA went under.  So not only did the fisrt savings bank of shit creek go broke but the second savings bank of shit creek went under too.

You can have all the Govt deficit spending you like it will be useless
if business can’t get loans to expand or establish or replace plant.

The real recovery is busniess driven. always has been always will be.

So deficit spending can be useful to accelerate away from the bottom of an economic cycle but only if the banking system is still in tact and open to lending to business.

What deficit spending can’t do is prevent the bottom of the cycle which Mr Swann is starting to realise as the economy insists on finding the bottom before the recovery.

When the bottom is found the cupboard is bare regarding deficit spending because the full arsenal was deployed in a futile attempt to prevent the recession or bottom of the cycle.

Esteban says:

04:40pm | 05/10/12

St Michael. I don’t like to over think the depression. A good old fashioned share market collapse after a bubble coupled with a collapse of the banking system which froze credit supply.

This combined with the intuitive but entirely wrong response of the govt increasing tax, cutting expenditure to save money in case it got worse and increased protectionism (tarrifs as you have pointed out) which were a barrier to trade although disigned to protect local industry.

That confluence of financial events ultimately lead to the USA retreating from world affairs which allowed WW2 to kick off. incidently Hitler had spent so much re arming Germany that warefare expansionism became the only option. many historians believe the military build up was never intended to actually create a second world war but it was the only way to survive financially.

Does history repeat? We have had or more like it still having a GFC, the USA is withdrawing from international affairs. The banks should have gone broke but sovereigns took on the debt so we will have to wait for those sovereigns to go broke to repeat the trilogy of the past.

Get rid of both parties says:

08:40am | 05/10/12

Ah, the big dreamy saviour. High end blah blah. Do you mean like that other broke country Japan?

Are all 22million of us going to manufacture this mystical high end stuff?

What are high end stuff?

How does financial services produce anything?

The goal is to transfer wealth FROM other countries, we’ve done the opposite and will now pay the price for our stupidity. We also had the option of self sufficiency but sold all our stuff so that options gone.

How anyone sees us coming out of this mess and seeing it as just a cycle is dreaming.

Borderer says:

09:18am | 05/10/12

The government has precious little abililty to control the economy

Bullcrap. Introduction of taxes, levies and red tape affect the level of global business interest in investing in the economy, not mom and pop stores but multinational corporations. If taxes are higher, if industrial laws are intractable, banking laws too complex or building codes harsher then they all weigh in to the decision to invest in that nations economy. Why would you invest in an economy where you can’t make as much money as one elsewhere? It’s called ROI, people who say that isn’t what multinationals are about should probably have their water tested.

John says:

09:22am | 05/10/12

This entire globalized world is really only benefits those who wish to make money quickly, it leaves massive side effects call debt, and undisciplined, un self-sustaining nations. Just look at the EU which is mini version of globalization. What happened there? The strong nations dominated and exported their goods, while the weaker ones where forced into getting debt from the people they imported from, basically sending them bankrupt. Just look at Greece, Portugal and Spain. 

The way to go is self sustaining economy’s, who keep making the system more and more efficient. Nations must produce for themselves and rely less from imports,or what it ever it maybe be.

Chris L says:

09:55am | 05/10/12

Fully agree Mahhrat. Instead of fixating on how we used to do things we need to focus on how we will do things.

Dragging our country into the 21st century by fibre optic cable is a good start, but a return to manufacturing would be good. The only way this will be possible is to offer something valuable that can’t be replicated by cheap $2/hour labour.

Mahhrat says:

10:37am | 05/10/12

@Chris:  Thank you, you made my point better than I did.

@GROBP:  Well, I’d go ask the Germans, they seem to know their stuff.

@Borderer:  Government is predictable.  It’ll backflip, lie sideways and disappear up it’s own arse sometimes, but it’ll never reduce what you pay in taxes.  John Laws and I disagree of many things, but on this he is spot on - no government will ever reduce its net tax revenue for long, because otherwise we’d realise how little government we actually need.

Get rid of both parties says:

10:44am | 05/10/12

Valuable? Like what Chris L?

It’s a dream at the end. It’s over ee are the country that was completely outsmarted, outplayed. We will be earning your $2 an hour. That is our only option.

If you can think of others and actually know what valuable stuff you’re talking about, let’s hear it, and, you might suggest who’ll but the magical stuff too.

Borderer says:

11:22am | 05/10/12

@Mahhrat
but it’ll never reduce what you pay in taxes.

It depends how sophisticated they are, presently not so much.
If the government encourage a better business environment then businesses are more profitable and they increase company tax revenues, encourage higher employment, more PAYG, less welfare and the states reap more payroll tax. The government is trying to squeeze more juice from the same oranges rather than trying to make the tree produce more fruit.

Government is predictable.  It’ll backflip, lie sideways and disappear up it’s own arse sometimes
I agree that this is a problem with our current government, their instability is my principle dislike of them. Soveriegn risk is a greater concern for economic growth than any single tax. How can any large business in good concience, act in the shareholders best interests then invest billions of dollars in a nation where the government announces one thing and does something completely different, implements massive new taxes without business consultation and expects that they will all follow along like sheep. They can’t and for some reason our commercially inexperienced government just don’t get that.

Chris L says:

11:27am | 05/10/12

@GROBP - How about high end electronics? It was an Australian who invented the microchip. We may yet find more such inventive people living among us.

How about software developing, communications or even high end fashion? There’s plenty of ideas yet to be dreamed up. Don’t base the country’s hopes on me, but if I do come up with something I’ll be happy to get rich in the process.

Alternatively we could all quit our jobs and wait for chaos to descend. Whichever you prefer.

Peter says:

11:49am | 05/10/12

GROBP has summed up the NLP plan for our economy extremely well.

To sum it up:  We’ll all be earning $2 an hour.  We have no other option.

Get rid of both parties says:

11:50am | 05/10/12

@Chris L.

You’re like that guy in the Life of Brian offering to fight with one arm.

You talk like we’re a rich country, we’re not. We were and we sold every single thing worth anything to foreigners. We continue to populate a broke country. I really don’t think high end fashion will do it.

Imagine a Chinese company manufacturing high end stuff. Would we pay high end prices? No, because we know they’ll accept low end prices. We are now what China was but far worse because we’re not smart enough to realise it, we don’t own anything, we don’t do anything but consume. It’s finished, we wrecked it.

It’s actually quite arrogant to think we’ll be okay. Why because we’re mainly white and we’re used to the rest of the world being our growers, manufacturers and general sht kickers? They’ve far outsmarted us, we’ve played right in to their hands and not too many people realise it yet. I can’t wait for the whinging and finger pointing.

You know, I predicted the housing market would collapse, it hasn’t, I was wrong. I had no idea my fellow Australians were in fact as dumb as they are.

Get rid of both parties says:

12:01pm | 05/10/12

@Mahhrat

You compare us to the Germans? Hilarious.

Look around your office or wherever you are. We are a fraction of those industrious, hard working, intelligent, frugal, saving people.

Have a look at Greece but take away all their assets and keep spending. That’s more like us.

Chris L says:

12:08pm | 05/10/12

@GROBP - It’s Monty Python and the Holy Grail.

You’re like that guy from that movie with that other guy. The one with the silly hair.

JACK says:

12:59pm | 05/10/12

The government has precious little abililty to control the economy

in a meantime the governrnent knows how to screw the people and make phoney laws to make us irrelevant in every decisions.

How come Switzerland can still prosper and moving forward while we going backward?

Any reason why?

Get rid of both parties says:

01:17pm | 05/10/12

@JACK

Switzerland isn’t increasing population while selling anything not nailed down. Simple.

Economist says:

03:13pm | 05/10/12

GROBP/Arthur,

Crikey today highlighted the following:
We are about to overtake Spain as the 12 largest economy in the world. On a per capita basis we are third in the world. When adjusted for Purchasing Power we are 18th, where we have roughly been for the past 30 years.

Taking on board the IMFs recent advice on world economies and the slowing down of economic growth in China (note it is not going to be significant negative growth, just a low down in growth) we will see a lot of uncertainty and significant fluctuations in a variety of key economic indicators such as interest rates and unemployment, but I do not foresee double digits in either or these indicators over the next 5-6 years. We are servicing our mortgages and the reasons that there are no votes in it, as stated by Kenny, is that people ae using it to pay down their debts faster which isn’t as much fun as spending it.

I’m curious why you can’t wait for the economy to collapse, is that so you can say I told you so, rather than be a little more conscious of the impact on your fellow Australians?

As for microchip development and smart Aussies I recall reading, but can’t find, an article on a small team, just outside Cooma, that I believe have developed new chips/batteries that will revolutionise the industry. You don’t give your fellow Australians much credit as innovators.

Get rid of both parties says:

03:51pm | 05/10/12

@Economist

GROBP/Arthur…................Doh!!!!!!

Clever bugger. Well done….Arthur sounded so old, my mate’s last name is Arthur….I’m only 47, it didn’t fit.

Anyway, Yes, we’re a very clever nation but is it enough. I’m talking about the average wealth will suffer immensely.

There is a bit of “told you so”. It annoys me how voters continue voting for those that fail them. There should have been a revolution dozens of times over the past few decades. I really detest our politicians, particularly Labor politicians. I don’t think their priorities go far beyond themselves and that stinks.

I truly believe what I’ve written both as Arthur and GROBP, maybe not that dire, I’m intending to shock, stimulate debate and get people thinking, if we continue on this path everything won’t be okay. We need reform and soon.

DJ says:

08:47am | 05/10/12

you do realise that ifyou take out the stimulus years this govt. and that of Whitlam spend less as a percentage of GDP than Howard did in a lot of his years?

In the 00-01 budget alone spending grew in real terms by more than 10% more than it did in the 08-09 GFC budget

http://www.budget.gov.au/2012-13/content/bp1/html/bp1_bst10-04.htm

maria says:

09:52am | 05/10/12

I don’t mind paying more for my mortgage…. fair comment.

but i do mind when i’m treated to be irrelevant and pay for the fews who screw us without any scrupules.

Rosie says:

10:16am | 05/10/12

DJ

Yes DJ I do understand all that high pressured stuff because I make it my business to do so. However, most voters don’t and can’t be bothered finding out! They will go ‘easy and simple’ buy a home if they can afford it, interest rates are out of their control, budget surplus is beneficial to all Australians! Govts are meant to take govern for all Australians and the nation’s future prosperity!

At the moment we are surviving on borrowed money, the reason we are doing better than other countries! I hear this all the time!

GigaStar says:

11:41am | 05/10/12

DJ - your analysis isn’t entirely correct. The jump in spending in 00-01 was the introduction of the GST which are classed as payments when the government passes it onto the states. If you ex-GST real government payments the figures show a steady increase in $ terms. Also a CPI deflater is better to use than a GDP deflater when looking at government payments.

Get rid of both parties says:

09:30am | 05/10/12

Much to your chagrin will be when you realize no economic theory fits what successive governments have done to Australia.

How did anyone think it okay to spend all the wealth from previous generations on this one and leave nothing for the future? What cycle is that?

Politicians have taken the credit for our lifestyles which is simply spending an entire nations wealth in a couple of generations. There’s never been a more selfish, greedy or stupid cohort of people ever.

Tubesteak says:

11:58am | 05/10/12

Do you even know what you’re talking about? Spending a nation’s wealth?

Seriously, what do you mean by that?

Wealth is created. It doesn’t just “exist” as some finite resource.

Get rid of both parties says:

12:58pm | 05/10/12

That’s right. Previous generations created it, we also were lucky with resources, then we sold it. So how do we now create it. I know exactly what I’m talking about.

I find your response dismissive of the truth.

Tubesteak says:

04:33pm | 05/10/12

You don’t even know what you’re talking about. How did we sell our wealth? What are you even referring to?

10 years ago there was no such thing as Facebook. Now some guy is a billionaire because of it. Get it?

John says:

09:09am | 05/10/12

So I guess, we are all going to pay our debts using mining ore and steel. 1 trillion dollars of it. Manufacturing in this country was sold out to china, and I wonder how much wealth-fare keeps food on everyone’s plates.

John says:

09:18am | 05/10/12

It’s still early, but this comment has to win the award for most ridiculous hyperbole of the day

andrew says:

09:22am | 05/10/12

Yes but personal debt is manageable while most of us have jobs. As long as unemployment stays low the average Australian will be ok. What we need the government to do is to stop handing out giant buckets of money to all and sundry so that national debt doesn’t spiral out of control, and do what it can to maintain high employment levels.

I feel government spending on health and welfare needs to be slashed or we are in real trouble within 5-10 years. The shrinking PAYG taxpayer base and struggling business sectors cannot support an increasing tax burden, the elderly and those on welfare will have to accept a drop in living standards - otherwise the whole system will collapse like a house of cards.

dovif says:

09:50am | 05/10/12

This comment is as dumb as it gets, While Julia has accumulated Debt for the last 4 years at a greater rate then Greece at any point in its history. As long as we have more competant economic manager after the next election. We are no where remotely closed to the level of Greece. We have Howard, Costello, Hawke and Keating to thank for that

dovif says:

09:50am | 05/10/12

This comment is as dumb as it gets, While Julia has accumulated Debt for the last 4 years at a greater rate then Greece at any point in its history. As long as we have more competant economic manager after the next election. We are no where remotely closed to the level of Greece. We have Howard, Costello, Hawke and Keating to thank for that

John says:

09:58am | 05/10/12

You don’t get it, I’m pretty sure the brighter ones do.

Get rid of both parties says:

10:25am | 05/10/12

@John.

Hyperbole? Is that your counter argument?

That’s good John, well thought out mate.

Get rid of both parties says:

10:35am | 05/10/12

Dovif. Where will future prosperity come from? Producing assets are all sold. we earn ten times what our competitors do. We’ve consumed everything the last couple of generations. Dumb isn’t a word I’d associate with me. I’m ridiculously wealthy from thinking for myself. You might remember I told you to short the big miners, and buy silver and gold. Did you?

Get rid of both parties says:

10:37am | 05/10/12

Are there two johns here?

Who doesn’t get it john?

andrew says:

10:07am | 05/10/12

I’d argue our standard of living has already been decreasing for around 10 years. I’d hazard a guess that the everyday costs of living ( housing / rent , electricity , petrol, food , insurances etc. ) have increased at a faster rate than the average income over the same period.  The government prefers to use “household income” to disguise the fact that the average household now has the equivalent of about 1.5 full time employees. To compound the effects of having less free time we also have to deal with the negative effects of increased population.

Get rid of both parties says:

11:00am | 05/10/12

Andrew, you’re a refreshing breath of reality very rarely seen here.

The deluded optimists, the left and the dumb will be cutting you down. They won’t have anything to back what they say, just you’re wrong.

Get rid of both parties says:

11:28am | 05/10/12

@The New Economist

Don’t think there’s much chance of grown up voters, ever. Look at Greece.

Communism’s broken, socialism’s broken, capitalism’s broken.

We need a new system, but I really do think it’s too late for Australia and really don’t think we’re in a position to recover. We don’t have the assets to do it.

I predict we’ll be earning what our competitors do, about 12 to 15k a year, there’ll be massive mortgage defaults, housing will be worth a fraction what it is now. We’ll be renting from the worlds rich, as did the Irish.

Alex says:

11:03am | 05/10/12

The government cannot and does not have influence over interest rates directly. They can only influence the way business is done in Australia, which in turn drives or slows down the economy, which then influences inflation. Inflation then drives interest rates up or down.

Swan has been trying to take credit for every move the RBA has made, which is a complete lie. As australian manufacturing is nearly non-existant, the inflation was driven by the mining boom and the money made from it, as well as the property spike. People made a lot of money from property and mining, which caused them to spend it which drove infaltion up, which booseted our economy and drove the rates up.

Now with ALP at the helm, and all the additional taxes imposed on industry and with the union goons driving business down due to industrial action, the money is no longer being spent, which is cooling our economy driving the interest rates down to promote spending. If the mining industry grinds to a hault our economy will be in shatters and we will see even further rate cuts from the RBA. But since Australian banks borrow from international markets, we will not see the benefit.

So in a way, if the government destroys a nations ecnonomy yes you will see interest rates go down. But they have no direct say or control over the rates, and especially no control or authority over the banks.

St. Michael says:

12:04pm | 05/10/12

@ Alex: they can do more than influence the way business is done in Australia.  The government can have a direct impact on inflation if, as with the US example, they borrow too much money and then have to print funds—by directing the central bank—to pay it back.  The end result of that phenomenon is hyperinflation.

And I think it’s a bit rich to say the Reserve Bank, or central banks generally, are apolitical.  Ben Bernanke is now campaigning, almost explicitly, for Obama by printing money every month until unemployment comes down.  Part of that is undoubtedly due to Romney’s threat to sack Bernanke if he wins the Presidency.

I also have a suspicion the RBA plays politics, too - note the interest rate rise in the middle of Howard’s campaign to become Prime Minister.  That played right into Rudd’s hands.  Low interest rates also give Gillard breathing space with the uneducated flatheads who are still speculating on the property market.

marley says:

11:54am | 05/10/12

While the depression, or more precisely, the weight of reparations on Germany after the first world war certainly had something to do with the rise of Hitler, he came to power shortly before Roosevelt.  I don’t see how you can blame the latter for the former. 

And the Japanese were having restrictions placed on them because they had invaded China, then Indochina, to the considerable annoyance of the British and the Americans, not to mention the Chinese.  It was less about trade and more about trying to halt Japanese imperialism in that part of the world.

St. Michael says:

11:59am | 05/10/12

In the case of Japan, the trade restrictions were put in place after the Japanese invaded Manchuria in 1931.  The US had very little to fear economically from Japan, certainly nothing to think trade embargoes just for economic reasons would be worth it.  You have to remember Japan was one of the Allies in World War 2 - a Japanese cruiser, the “Ibuki”, escorted the ANZACS to Gallipoli.

It was still a very insular economy - it’s generally agreed they didn’t go to war because of economic disaster, they did so because they became enamoured of the idea of a destiny off the Japanese archipelago and put in motion a plan to achieve that.

In the case of Germany, economic conditions had a *part* to play, but they weren’t the only cause.  Germany, like Austria, suffered dreadful hyperinflationary conditions in 1931-1933 or so.  Hyperinflation in a way is worse than a Depression because at least in a Depression your currency has *some* value, it’s just there’s none around.  In hyperinflation a millionaire is a pauper, as Zimbabwe shows us.  Part of that hyperinflation came from heavy war reparation conditions imposed on Germany and Austria in the wake of World War 1.

Hitler’s rise to power comes from (a) the fact he proposed populist and/or simplistic solutions to economic problems - chiefly, killing Jews - and (b) the fact that Germany’s democracy was heavily fractured.  Hitler came to power with less than 30% of the vote, most of which was secured by him hiring every thug and criminal he could find to vote for him.

I do agree with you that political systems tend to swing extreme left or extreme right after an economic disaster.  Me, I’d hope it’s not extreme left this time round, because we’ve already seen that communism does not work.

St. Michael says:

12:08pm | 05/10/12

Gah, typo.  Japan was one of the Allies in World War 1, not World War 2.  The “Ibuki” escorted the ANZAC fleet from its staging point at Albany, WA, to the Middle East.

Esteban says:

04:47pm | 05/10/12

I saw a program once about German POW’s captured by the Japanese in WW1 and imprisoned in Japan.

They were treated so well by the japanese that many stayed on after the war and there is a german speaking mixed race community that marries with itself. of course they speak Japanese as a second language.

The purpose of the documentary was to explore how in WW1 the Japanese revered their prisoners as noble warriers and treated them very well yet were the complete opposite in WW2.