Relaxing laws on foreign ownership of Australian housing has been one example of policy that can cause overheating of property prices and an unwanted inflow of capital with upside pressure on the AUD.
The upward pressure on housing in the top of the housing bubble has been exacerbated by the use of the new home buyers grant and many of those people now in negative equity - but it put upward pressure on housing and heated the economy for false growth that has now baked problems into the cake.
This type of policy added to inflationary pressures. So the RBA hikes rates because 'we are all better now'. Oh really - the problems are just surfacing and have not substantially hit Australia just yet but they are starting to and the set up is much worse than people think.
The carbon tax is inflationary - just another example of ridiculous policy that will do nothing for the environment. It shifts the pollution sideways and changes nothing in the short or medium term. The world will not follow as they recognize the financial systems are in crisis - not the right time for this measure. If the whole world did it I would agree however this is not the case. At 0.3 of a tenth of 1% of the atmosphere I don't personally see the correlation. Water vapor makes up 95% of the greenhouse effect do we now tax clouds and hot showers???
This new tax will cause all sorts of problems in the transport industry and push up costs and therefore inflation - and then the RBA wants to 'control' the inflation with higher rates. More carry trade and higher AUD pressure. Are they serious about the environment - I have to question this?
But the government came up with the pink bats scheme and an influx of cowboys hit the industry and brought forward the demand curve which has now left the core industry in tatters. The subsidies for solar were taken away crashing a local alternate power business in this area so is this government really out to assist a new greener cleaner Australia or do they just want a new source of revenue? Excuse the skepticism but they want to fix the world apparently - yet I see lack of viable outcomes from their policies. Sorry I digress.
In the depths of 2008 we needed to secure deposits however the way it was handled allowed Macquarie Bank to take up $20B and invest it in 20 or 30 years bonds at a 5% yield if my memory serves me correctly. It was not used for lending or anything to do with our economy - just a poor piece of legislation equivalent to some of the US moves taken at that time. Our banks were in trouble but this gem was a stuff up - a legal move by that bank no question.
I digress again sorry - any upward pressure from policy assisted a short term response from the economy that caused the RBA to hike our rates a year later - hiked way beyond that of our trading partners and this caused a carry trade which pushed up the AUD. Funny how the $900 pay out went to pubs and clubs and retailers for a while but now the same retailers suffer with the high AUD.
The deficits have been over stimulatory - $240B in less than 5 years of new debt - the fresh debt was added to a clean balance sheet so it does not look that bad - not yet. However when you consider that this is $11,500 per person man woman and child - sick, elderly, babies, on the dole etc - that is a shed load of debt per tax paying worker in this country. Probably well above $35000 per tax payer and building - and costing a wasteful $10B per year to service. Our personal debt was already way too high.
If the stimulus was spent on productive infrastructure - 'capacity to produce' and incentives for the mining boom to assist this star in the team I would be a lot happier. But what do we have?
Fast very expensive porn - eventuially, expensive buildings and lap tops and a web site do not make a revolution in education what a joke. That one tuck shop was not a one off it happened in our local state school - a classroom cost $800,000 and could have been built for no more than $250,000 according to a local builder.
It is still happening - a $25,000 wall going up in another school in the area and a local builder that quoted $6k missed the tender acceptance. All this came from a die hard ALP supporter here. The one off cash hand out - now backfired, repressive policy on the mining boom, very expensive car manufacturing jobs, fight with the job creators... it goes on and on.
And not all the ALP's fault they have the balance of power and this skews their policy to the detriment of all at times IMO. So too much discussion on gay marriage, pokies, carbon and boat people - too much squabble and not enough help for tourism, manufacturing, agriculture etc while we miss the infrastructure boat.
Strangely this mismanagement will lead to a smaller Australia, diminished industries and a lousy credit rating (given long enough at this rate) eventually and this will cause an exit of that hot money from housing and the carry trade - and down comes the AUD and problem solved. Wait until the Chinese realize they need their money at home and see what property prices do in Sydney then. Buyers rushing for the exits in an illiquid market - ohhhh.
So our dollar has been too high - policy has forced the RBA's hand to some extent - but a strong trade surplus added the core reason. China did that not the government thay can't take credit for that - at least the rich miners were the reason we had the product to deliver and that caused the high AUD so their fault! But hang on they created a lot of the jobs and this went around and around the economy many times so the inflationary wasteful policies did not create many jobs at all did they?
The government did create a lot though - in the public service that is - something they are good at - yes minister. Ministry for meetings to see if we should have meetings. Major high AUD pain results from all of the above - except where I digress - that is until the Euro goes down and the USD falls back as competitive devaluation takes hold.
Mr Swan bragged that our economy was so strong after the Lehman Bros default - and did it with the creation of inflationary debt and this continues unabated to this minute.
Perversely - without a clean balance sheet to start this new debt could have stacked up on a much higher debt and made us look unattractive from a credit viewpoint. This would have muted the flow of funds to Australia. How interesting - its Costello's fault for clearing the debt.
But that is OK because the ALP claims credit for their policies in making Australia a fantastic place to invest (?) - with zero business acumen running the place I question how long this can persist.
Fixed exchange rates - no we have to fit with the international banking system like it or not. That much is dictated to us we have no choice. Is the ALP the only cause? - NO. There has to be a better system.
Now if anybody wants to come back on one point you are missing the point. It is a combination of factors that have a cumulative effect and that is worth debating IMO.
