re: 3-4 yrs of latham and crean in office
Ridgey, I'd sayyou and the other mindless Liberal supporters are the ones misrepresentiing the facts... This is just a small sample of economists opinions on the lib/lab interest debate. They all say pretty much the same....
AM - Monday, 30 August , 2004 08:16:00 Reporter: Stephen Long TONY EASTLEY: So how much substance is there to John Howard's claim that a Labor Government equals higher interest rates? Well, financial markets don't seem to be giving the idea much credence. And economists also dispute Mr Howard's claim that profligate spending by Labor was the reason for the high interest rates of the 1980s.
Finance Correspondent Stephen Long.
STEPHEN LONG: John Howard is warning voters they'll be slugged by higher mortgage repayments under a Latham Government. And he's claimed that he can guarantee rates would always be lower under the Coalition.
But if that was the case, you'd expect financial markets to be betting on an interest rates hike if Labor wins. But economist Stephen Koukoulas of TD Securities says that markets have built in no such premium.
STEPHEN KOUKOULAS: If Mr Howard was correct and interest rates would be going up under the Labor Party, the thesis would be that if Labor was doing well in opinion polls and was likely to win the election, then the futures market would reflect higher interest rates.
In fact, it's not doing that. If anything, the better that Labor have looked over the last few weeks, the short end of the interest rate curb has actually rallied, that's a roundabout way of saying that the market has no concern from an interest rates perspective of a Latham Labor victory.
STEPHEN LONG: The Prime Minister has also asserted that rates always go up under Labor because free spending ALP governments run up big budget deficits. Yet the high double-digit interest rates of the late 1980s had nothing to do with deficits or profligate spending.
Stephen Koukoulas.
STEPHEN KOUKOULAS: The interesting thing about the high double-digit interest rates of the late 1980s was it actually occurred when Government was cutting its expenditure, when it was running up quite significant budget surpluses.
The reasons for those high interest rates was that the Reserve Bank had that misguided policy proscription of hiking interest rates to cool the economy, to correct the account imbalance.
And I think even in a quiet moment now the Reserve Bank would acknowledge that that was a policy error on their behalf.
STEPHEN LONG: Interest rates have been lower during the Howard era than they were under Hawke and Keating, but that's consistent with a global trend towards lower inflation. And compared to other advanced economies, interest rates in Australia have been high.
STEPPHEN KOUKOULAS: Relatively low interest rates under the Howard Government have occurred at a time when Japanese interest rates are at zero, in the US they fell to a low of 1 per cent and even in the Euro area, they were down at 2 per cent.
STEPHEN LONG: If you take the Reserve Bank at its word, it's likely interest rates will rise whoever wins in October.
To quote the Reserve Bank's latest quarterly bulletin, "it would be surprising if Australian interest rates did not have to increase further at some stage in the current expansion".
