So will interest rates now always be lower under Labor?

It’s almost a year since John Howard parted the scene, but his mantra “Interest rates will always be lower under the Coalition” still rings in our ears.  It was powerful, memorable and effective, except at the last election, when so many of the people stopped believing it, or just stopped listening.

It was always a misleading slogan.  Howard himself knew that, he knew who set interest rates, but perhaps he believed that the economy that he had nurtured for so long favourably influenced the Reserve Bank’s decisions.  Anyway, it served him well almost until the end.  The fact that ten consecutive quarter percent interest rate rises occurred before the election did not deter him from endlessly repeating his mantra and using it in campaign ads.  Since the election there have been two quarter percent rises, one quarter percent fall, and now a one percent fall, so that the rate is now three quarters of a percent below the last level under the Howard Government.  So interest rates are not always lower under the Coalition after all.

So should Kevin Rudd now re-work the slogan to “Interest rates will always be lower under Labor”?  I hope not, and I don’t think he will.  It would be a dishonest thing to do. There would be few, even among the politically disinterested, who would not know that the Reserve Bank sets interest rates, and that the Bank has been deemed to be independent by all political parties, who have largely respected that independence. We know that there are numerous factors that influence Reserve Bank decisions, and that although the state of the economy over which the party in power has some influence is one, many international factors, over which no one in this country has any control, are often overriding factors.

The point of this piece is to point to the political dishonesty of the party in power making claims they can or will keep interest rates low.  Quite apart from the fact that such claims are without foundation, such claims can blow up in their face, as has happened now.  I don’t expect we'll hear anything from the Coalition about the now-apparent falsity of this slogan, but Labor may find it hard to resist the temptation to rub the Coalition’s nose in it.

Although the extent to which political influence can be exercised over commercial banks is debatable, Malcolm Turnbull has already expressed the view that it was his advocacy for mortgage holders, his “standing up” for home buyers and small business, that has resulted in the fairly high 0.75 to 0.8% passing-on of the rate cut.  He has quickly taken credit for this, mind you not total credit.  And in the process he has lampooned Rudd and Swan for “caving into the banks”.  That their concern was to ensure stability among the banks in the face of steeply rising costs of borrowing drew no acknowledgement from Turnbull; he was hell-bent on extracting as much political capital as he could.  How much his line was swallowed by the public only subsequent opinion polls will tell, but one can be confident that the banks will not be too pleased with him, and will not be impressed with his distortion of the decision making processes banks use to reach such decisions, and his belief that leaning on them bears fruit.  With his merchant banker knowledge and understanding he would know his public rhetoric was disingenuous; if not, his competence in matters financial is called into question.

If Turnbull is prepared to embrace such populist positions in an attempt to bolster his position, even at the expense of his credibility, don’t be surprised if he repeats the Howard mantra, or something like it, sometime in the future when it suits him politically.

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Bushfire Bill

8/10/2008I wrote on the Poll Bludger that Turnbull's is the old "Rainmaker Scam". They advise various punters to bet on every horse in the race and then take the credit for a success, no matter which nag wins. The (remaining) mugs then pay up for their next pearl of wisdom. "Interest rates will always be lower..." is just another example. You can't prove it either right or wrong. I hereby dub Turnbull: "Rainman" Mal. P.S. He <i>literally</i> tried to make rain at one stage too, with that Russian "air ionizer" machine that he funded to the tune of $12,000,000 in the caretaker period before the last election. Probably picked up a few ideas on "Rainmaking" in general from that...


8/10/2008The banks have already slammed Turnbull for his populist stance as have a few of our more credible journos. I note also that many bloggers, some reluctantly, are giving Rudd and Swan a tick of approval for the way they are handling the crisis and endeavouring to keep the electorate informed. I too hope that Labor will not rework the stupid coalition slogan. Labor has no need to do so because the perception that the coalition are better financial managers no longer holds water, and if Turnbull keeps on taking the populist stance and vacillating from one position to another to suit, his credibility as a former merchant banker who knows his way around the corporate world will be in tatters. I expected more of Turnbull. I expected him to stay true to himself, to be responsible and to put the welfare of the nation before political point scoring in these times when there is a serious global financial crisis. Sadly, it appears he is tarred with the same brush as the rest of them.


9/10/2008*Sigh* Just when you thought a change of leadership would do them some good, it's a case of back to the future. Surely Turnbull can't think that people actually believe him does he? Only the rusted-ons would take anything he says at face value. What I find most disheartening is that it appears the Libs are deliberately patterning themselves after the Republicans in the US... the tired old tactic of "repeat a lie long enough and loud enough and people will see it as the truth". Of course we all know how well it's currently working for them in this election don't we? Not to mention GWB's approval ratings.
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