Two things are clear from this article.

1. The Australian economy in general and interest rates in particular are largely contingent on international market movements. If this is so, it makes little sense for John Howard to be claiming first (before the last election) that his government would keep interest rates lower than Labor and secondly (now on the verge of another election) that if there is another rise in interest rates the Australian States will have been responsible for it. The article shows this is mere political buffoonery.

2. The Reserve Bank is much closer to the Government and its friends than its independent mandate requires. On the one hand, Henry tells of well-direcetd leaks to mimimise the shock news of a rise, and on the other hand he signals that the bank is intent upon giving the Government 'the greatest possible time before the Federal election' to allow the bad news to dissipate before the Coalition faces the anger of the electorate.

"The Australian economy in general and interest rates in particular are largely contingent on international market movements."
If that was so, official interest rates throughout the world would be more or less uniform.
One of the most productive measure any national government can take to retard an interest rate rise, is to maintain a healthy surplus - government deficits put upward pressure on interest rates.
It is unfortunate for us all that state ALP governments are not only slipping into large deficits, but are wasting their borrowings on salaries.
That's the nature of the beast.

Admiral von Schneider says that if my proposition - "The Australian economy in general and interest rates in particular are largely contingent on international market movements" - is true, then "... official interest rates throughout the world would be more or less uniform."

That second proposition doesn't follow from the first proposition at all. We are not in a uniform world economy, but one dominated by a handful of super-economies (not all of them within national borders). Australia is an economic minnow in this very large ocean. China and the US for example are so dominant that their economic fortunes control Australia's and the reverse is not at all true. Wall Street sneezes and the ASX catches the fle as they say.

National governments as small as Australia's can take only tiny steps to retard an interest rate rise. Our resources boom is thoroughly dependent on the continuance of China's economic boom. And the trade deficit with the US since the US/Australia trade agreement has proved very much to be in the favour of the US.

The attempt by Howard to blame the Australian States for a likely interest rate rise (*uncomfortably close to an election) is desperate stuff from an increasingly desperate PM who told the electorate in 2004 that he would control interest rates...remember Admiral?

He was either lying then or lying now. Can't have it both ways.

The Admoral is right about the bureaucrats.Iemma's fat cats cost us $7 billion pa.We have approx 3 million workers.Do the division.Our fat cats cost each worker $2300.00 pa.Why is our state broke?

Answer; undisciplined Labor Govts.

"an increasingly desperate PM who told the electorate in 2004 that he would control interest rates."
Howard was not lying, he did not say that.
Howard cannot control official interest rates, that is the sole prerogative of the Reserve Bank and it was his government that made it so.
What he said was interest rates would always be lower under a coalition government than under the ALP.
We'll see.

Admiral says

"It is unfortunate for us all that state ALP governments are not only slipping into large deficits, but are wasting their borrowings on salaries."

What complete and utter tosh. Admiral, it's actually quite easy to access the various state budgets and read them.

Just a quick look at 2007 - 08 state by state shows:

VIC = surplus $324 m
NSW = surplus $376 m
QLD = surplus $268 m
SA = surplus $38 m
WA = surplus $1.8 b
TAS = surplus $150 m

couldn’t be bothered looking up ACT and NT.

The states have been in surplus for years and continue to do so. Your ignorance is astonishing.

Crocodile,it is a croc of the proverbal to say NSW in particular is in a surplus.None of our taxes are spent on new expressways.Our tolled roads cost an absolute bomb.

We are in serious infrastructure debt.The neglect and mismanagement in NSW is mind boggling.They now have to borrow billions to pay for the lag in infrastructure.At every turn it has been waste and a debacle of management.So don't try do defend these Labor morons since it discredits your own arguments.

From what I hear Tasmania is joke along with NT and Qld is fast going the same way.In total our State Govts will borrow $70 billion for infrastructure and have just blown the GST on wages for the PS.
For every working person in Aust this $7000.00.So add that to your mortage.The Coalition have paid off $96 billion of Labor debt and have a $90 billion surplus.

Arjay, oh deary me. I havn't defended anybody. The admiral made the statement that all the of the state governments are running defecits. This is patently untrue as the state by state budget papers demonstrate. You can waffle on as much as you like about the projected spending of 70 billion dollars. It is accross 6 states and 3 territories combined and over 5 years. Big deal. So what if 96 billion has been paid off ( it isn't all labor debt either. A substantial portion was carried over from the fraser years. ) Anyone can sell off assets to pay debt. I can clear my own debt tomorrow. I just won't have a house. I would prefer our states spend money on capital works rather than take the Howard option of wasting billions on useless subsidies like child care rebates and private health handouts.

The facts are Croc all the Labor States are in debt.It is just like you letting you house run down for decades and saying you're in surplus since you have a few thousand in the bank when the repairs will cost 100 times that amount.In reality you are in debt.

In NSW we just had 700 taxes and charges go up way above the rate of
inflation.This is also adding to the pressure of interest rates.

Kevin Rudd recently stated that Morris Iemma was a good premier.It would have been better from Rudd's perspective to have said nothing.If he thinks that Morris is a beakon to be emulated then heaven help Aust if Labor gets in Nationally.