I hate the use of interest rate changes to effect particular changes on the economy. They just don’t work effectively, its clumsy and always effects the economy in many more ways then intended with the outcome infinitely removed from the intended result. If interest rates rise it affects Australian current account, it effects the interest payments on overseas loans, its lifts the price of goods, it effects homeowners, the value of the A$ and hence the cost of imports, and the list goes on. Yet I do agree that some parts of the economy are overheated and need to be targeted to slow down. We have a stupid situation where the government tries to stimulate the housing sector with 1st homebuyer’s schemes and slow the economy down with interest rates. If they want a slower housing market remove the artificial stimulants. Similarly if you want to slow credit creation down the government needs a control to target that particular product i.e. a tax (unpopular as it would be) does go into consolidated revenue. (Although indirectly so does a rise in interest rates)
PS I was wrong last month and agreed with GP regard interest rates (cold shiver) {how can everyone else be so wrong LOL)
