There is one factor that neither labor nor the libs will be able to control in the future.

That factor is the cashed baby boomers who retire, interest rates will not affect their spending habits, in fact higher interest rates means more money they will earn on some of their investments, thus more money for them to spend.

It will not matter which party wins the next election, interest rates will continue to spiral upwards. Until the next big crash.

Excellent article. I totally agree. Howard is always in to the negative blame game and as the leaked poll said, he was going to attack the states as his latest ploy to con the electorate, since none of his other ploys have worked so far.

In Howard's Australia we have become materialistic and addictive consumers. His monetary bribes have resulted in people spending and spending and continually spending beyond their means. The piper is being paid.

Of course the interest rate rises are NOT the states fault. This is just another of Howard's many furphies.

Well argued. I don't think Howard was really convinced himself that the states were to blame for the interest rate hike. He had to put out some sort of statement sheeting the blame home elsewhere, and as the states have been his latest bugbear, they got it.

A small digression but now you mention it Fred, weren't those 12 technical colleges meant to be up and running now? They were meant to help address our hard skills shortage. As far as I know only three have been established and two of those are struggling for enrolments.

So much for the Governments commitment to skilling Australia.

The Howard government is criticising the States for borrowing to invest in infrastructure. But they should be applauded for doing just that.

The Howard government had the perfect opportunity to do some big things for Australia, but instead they frittered away the years catering for the wants of Mr Bush and the big end of town. Mr Howard's ego is his Achilles Heel and the US State Department plays him like a trout.

Interest rate adjustment is just fine tuning economy...the effect, assuming all the other factors remain as is, is small stepped changes in overall flow of cash through the economy...

but if there are bigger factors at play affecting that cash flow...then focusing on interest rate is a waste of effort...

the biggest money spinner, ie where bulk of money flows(besides total wages flow)...is common people and paying interest on home loan...an accountant said on loan of $300,000(the average loan) over 30 years and payment per agreement....the person pays $900,000 over term ie $600,000 interest to pay for $300,000 loan...30 years later when close to retirement...see the problem...effectively 'loan-work-desparation'-slavery to pay loan off otherwise fail to meet repayments and end up financially much worse...yep bankcruptcy...which forces a common Australian into a desperate state to work to pay for a place to live...and more likely to accept exploitive working conditions...while sacrificing quality of life...not the most proxductive of situations...

solution...a change is needed...which will naturally happen...like those gas guzzling monster american cars built upto 70's that now rarely seen....people will find a better balance to work and life...and its better if parliament recognizes this and with good laws forces the goverment to act now for lesser return but better future outcome...eg smaller and cheaper homes on smaller land...and larger parks with facilities in each suburbs...so home is for eating and sleeping...and outside for activities...And this has added benefit of cheaper energy bills particularly when 'cheap energy' appears at an end and costs set to sky rocket... as an example...

Sam

A good article and an equally good set of replies. Howard should also have used the surplus to provide more infrastructure instead of giving back to the spendthrift public to squander and push up inflation. We still desperately need more tradespeople and on a completely different track we still need public housing and care for the mentally ill who the states have put out onto the streets. No votes there however.

David

Australia is a small part of the world economy, Australian governments can only influence interest rates not decide them. This is Howard's lie that the Liberal Party could keep them low. If you happen to be paying a $300,000 mortgage I bet my bottom dollar you think John Howard is a liar, you would be correct.

What does all this political banter mean to people who are losing their jobs to offshore contractors and workers? The Australian Government has failed them. It created wealth for franchisees, zillionaire shareholders and the new middlemen but has stolen the livelihood, working conditions and divided us.

Labor toddles along behind the Coalition trying desperately to hide its little red flag while waving the same flag in the faces of sacked workers.

On OLO the Labor and little el mob try to intimidate ordinary, ‘uneducated’ people who offer an opinion that shows Labor and liberal failures (for instance: picking up on grammar or spelling mistakes rather than addressing their concerns and dismissing us as stupid retards). They do this while claiming support for the downtrodden whilst really exploiting their powerlessness.

Big L Liberals on the other hand think battlers are “ubute” because they can exploit that embattlement to pit us against our own, thereby lining the pockets of their investor network mates. (I am not referring to ordinary security investors. They [babyboomers] are being set up as a scapegoat when it’s the wealthy investors whose main pastime is managing their investments - not to just have a decent life but to build their empires (off shore of course).

How will Rudd or Costello fix the economy? Oh a huge PR campaign will create a conscionable reality and sooth away the concerns of the qualified with marketable skills. Meanwhile in some quiet street in the suburbs a couple stress and argue over money and another marriage is spins out; a police officer escorts a stubborn family, who couldn’t afford the mortgage, from their home, the children are crying and tripping up mum as they cling to her - while in the background on the families TV John Howard boasts how “comfortable” he feels about the economy.

That the Liberal’s laws have disabled unions is bad enough, to see Rudd turn his back on a body that could protect workers is tragic. Not to mention those left/small el liberals that hardly challenge disabling union laws while lobbying for legalisation of harmful drugs.

http://www.youtube.com/watch?v=DDweeUqnQSs&mode=related&search=

I sneezed a moment ago, John Howard is to blame! I spent too much money on something I really did not need, John Howard is to blame.
My union demanded a wage rise beyond what my employer could afford and I lost my job when the business went bust, John Howard is to blame!
John Howard is being blamed for everything recently. The reality is that the economy is doing well at present but it needs the brakes applied so the Reserve Bank has applied some pressure and will apply some further pressure if people don't stop spending money they do not have. The states are having a field day, awash with GST money they think they can spend as much as they like on projects that will get them re-elected. We have a new racecourse building in the parklands, some unwarranted roadworks (instead of the transport infrastructure we need) and plans for a fancy new hospital in a ridiculous location to name just a few things. We are not getting on with the job of building up the state's infrastructure - but that apparently is John Howard's fault for not supplying the money.
Not sure what the state is spending the GST on - oh some of that is going on 'free cabarets' for the residents of nursing homes in marginal electorates - at which Julia Gillard and friends are providing Labor election material and telling the old dears to think of their families when they vote.
Give me a break...

VK3AUU, I agree. Until Communicat had a whine. Great vintage too. 687 I believe.

Seriously though who would know the Australian economy better than anyone else. Of the politicians that is, as we know they just get others to do the work anyway and write the speeches for them too.

That politician is Peter Costelloe and he has said and not denied it that Howard is essentially a spendthrift with no concern for the economy come elction time. Even Peter worries about Howard's spending.

Who else is better qualified to comment? The Treasurer has to be the one to believe on Howar'ds attitude to the public and the economy. That is anything goes as long as he wins the election.

10 Years Of Service
by Dropkick Murhys
The status of our future in both past and present time,
is relegated to a member of a higher class than mine.
To determine and direct the lives of family men who bear the burden
of living up to standard that doesn't exist in 1999

[Chorus]
Who's gonna save us from this lonely picket line,
10 years of service but I'm still not worth your time.

Times may be changing but I'll never leave behind the hopes
and thoughts I have of better days for families such as mine.
Because if history repeats itself and time will surely tell.
What goes around is gonna come around and you'll know our pain too well.

[Chorus]
Who's gonna save us from this lonely picket line,
10 years of service but I'm still not worth your time.
And I've seen men give their lives,
and heard the stories that they tell of how they labored
for this company which sold it's soul to hell

[Repeat 1st verse]

[Chorus]
Who's gonna save us from this lonely picket line,
10 years of service but I'm still not worth your time.
And I've seen men give their lives,
and heard the stories that they tell of how they labored
for this company which sold it's soul to hell

Who's gonna save us from this lonely picket line,
10 years of service but I'm still not worth your time.

END

Who buys all these houses after they’ve wrecked the lives of the current owners? Spiv investors? Interest rates skyrocketing just as thousands of staff are sacked in major telcos and car manufacturing sections. Who laid the groundwork and disabled unions. It’s not just interest rates but job losses. If the head of a corporation mislead investors on the true state of a company, they’d go to goal; but, if a Prime Minister’s PR machine does the same - it’s non-core misleading PR.

VK3AUU Yes indeed. No doubt about it.

Cummunicat yes share holders should sack the board and company directors who betray Australia's workers.

Dear Fred,

I am grateful for your article on this Forum and in the Australian.

Please send me your email and I can send you some things

I am at

elek@netspace.net.au

Andrew Elek

In his opening sentence Fred Argy verbals the PM:
"...John Howard, argued that the blame for any interest rate rise should be sheeted home to the states..."

In an interview on SKY News on 26 July the PM was explicit:
Q. "Is that State Government debt and their deficits, is that the major cause for the upward pressure on rates?"
A. "I am not saying it is the only cause, what I am saying is that it is a cause and state debt will be $70 billion over the next five years....I am not saying this is the only upward pressure on interest rates, but it is an upward pressure..."
The full interview can be found here:
http://www.pm.gov.au/media/Interview/2007/Interview24463.cfm

For an illuminating history of Australian interest rates in the last 20 years under ALP and Coalition Governments, go here:
http://www.globalfinance.com.au/interest_rates_australia.htm

The advertising campaign about interest rates at the last election promised that Mr. Howard would keep rates below Labor. Something impossible to measure. What Mr. Howard did do though is to give the perception he would keep interest rates down. Perceptions can have as much impact as promises made. He now has to wear the pain of his own past election advertising campaign which is boomeranging back onto him.

This is as much rubbish as I have ever read. I do not know what qualification some people need to post here, apparently not much

Interest rate rises because of the following
1. real interest rate rise
2. excess demand which drives up prices

excess demand is cause by people with too much money to spend, ie high wages paid to state public servents, too much projects undertaken by the state, high investment in the mining sector.

Since output have not been increase as much as wages increase, inflation happens.

Therefore while Federal government can set policies which help decrease inflation, ie tight monetary policy (budget surplus) and work choices (which help minimise impact of wages growth) if the state government and private sector over spends, the federal government have very little ability to limit inflation

Fred gets it wrong, Again......

From the article “The states had a surplus of 0.4 per cent of GDP in 2005-6 and are projecting a deficit (net borrowing) of 0.4 per cent in 2007-8: delivering a stimulus to the economy of 0.8 per cent of GDP.”

I would observe, the last thing the economy needs, with employment at a record lows, was more “stimulus”.
Such “stimulus”, unable to be satisfied from within the labor market (due to record low unemployment rates), becomes a direct inflationary pressure, which could produce the wages-inflation cycle which helped cripple the developed economies in the 1970’s.

Hence the state spending and stimulus is a direct contributory effect, if not the cause of inflation.

Re” Incidentally, it is ludicrous for the Prime Minister and Mr Costello to say that private financing of new infrastructure is OK but public sector financing is not. They both have exactly the same impact on interest rates.”

The interest paid by private entities will be managed by a visible economic return.

The public funded stuff has always tended to represent money into a socialist sinkhole of mismanagement and incompetence which consumes resource and benefits no one, except the union buddies who are building the infrastructural monoliths.

Through borrowing to spend on something which produces little to no benefit, do we generate inflation.

I see the left got in early, well maybe a day to be up for the postee, bringing the dole cheque.

Looking at the chart of interest rates since the 1980s you could conclude that Labor caused a spike and then fixed up their mess and the Libs took over and not much has happened since.

Treasurer Howard presided over significantly higeher rates than PM Howard. You could argue he learnt from his mistakes (which is what Kevin Rudd seems to arguing as an "economic conservative") or he is just lucky with the most benign world economic environment since the 1950s.

I remember the British Tories made inflated claims about their economic prowess in the 1980s - Tories Good - Labour Bad - which all fell in a heap in the early 90s.

Sure westernred, Keating fixed up the mess all right, by pushing the unemployment rate to 11%, the highest since the Great Depression (PDF/Adobe Acrobat):
http://www.melbourneinstitute.com/wp/wp1997n24.pdf

Yeah, thanks all the same Admiral, but if I want some Liberal Party propaganda I'll just turn on the TV.

At least when I watch government advertising I can see how my tax money's being spent. Nice to see the Liberals aren't wasting any of my hard-earned money, eh?

Mr. Howard has pushed the argument strongly that he is fiscally responsible. At election time in the past the Coalition have argued that they have had their policies costed by Treasury; whereas, the Opposition figures just don't add up.

This year the Coalition have lost the plot; operating without reference to Treasury. The plan in relation to the Murray Darling was not costed by Treasury; ad hoc decisions have been made in relation to aboriginal affairs and the Mersey Hospital. Millions of dollars have been squandered on advertising campaigns pushing half truths.

Mr. Howard did begin to blame the States for the latest rise in interest rates, but when the States began to show how they were maintaining surplus budgets Mr. Howard suddenly went quiet.

According to the Treasury Corporation of Victoria, State Budget Summary 2006-2007, Victoria (for instance) has an
operating surplus of $317 million, but an increase of general government net debt from $14.5 billion to $20.3 billion by 2010.

To say Victoria (for instance) has no debt is like saying that you have no debt if you have $1000 in the bank when you have a mortgage of $250,000.

http://72.14.253.104/search?q=cache:hd3_WQh3sO8J:www.tcv.vic.gov.au/attachment/docs/6-2-4%2520Victorian%2520Budget%2520Summary,%25202006-07.pdf+total+victorian+state+government+debt&hl=en&ct=clnk&cd=3&gl=au&client=firefox-a

All our Labor State Govts are in denial.Ex Premiers like Bob Carr signed off gleefully on the GST arrangement with the Federal Govt and then cried foul when they could not contain their own excesses and poor management.

The NSW economy is just chugging along.We just had over 700 taxes and charges go up above the inflation rate.Our infrastructure is not coping and we pay a fortune in tolls just to travel around our city of Sydney.We are being taxed into poverty by this Iemma Govt.
No one wants to build or invest here since taxes , charges and red tape make it prohibitive.As a result we have rental shortages and falling property prices in many areas.With increasing interest rates many are still left with debt when they are forced to sell.

The Iemma Govt has also restricted the release of land to keep prices high and makes first home buyers pay for future infrastructure with $50,000.00 tax on each property created.They are an absolute joke!

Our State Govts have abrogated their responsibilities.They now want to sell off many services so they cannot be held accountable.We really have to question why we need them at all.

Kevin Rudd recently said that Morris Iemma is a "good premier". If this is the benchmark by which kevin measures success,then be prepared for more Paul keating "Banana republic" scenarios when they get into power.