Howard government says: states are to blame if there’s an interest rate rise.

  • As Parliament tomorrow begins a vital fortnight session, the “Labor Can’t Manage Money” ad, unveiled on the web yesterday, says that “Kevin Rudd’s Labor premiers” over five years “are borrowing $70 billion and plunging Australians into debt again”. “Never forget, it is governments who borrow money and get into debt who put upward pressure on interest rates,” the ad says. — Michelle Grattan, The Age

Economists and commentators say: um, no actually.

  • Have you got the government’s message? If the Reserve Bank pushes up interest rates this week, it’s Labor’s fault. It’s as audacious as it is wrong … the argument mounted by the Prime Minister … would get him failed if he used it to answer a question in an economics exam at any time in the last 20 years. It was once true. The Prime Minister says “when a government, be it state or federal, goes into debt it must borrow the money to finance that debt, thus competing with private businesses for available funds. This puts upward pressure on interest rates.” For the last two decades, as a result of reforms championed by John Howard among many others, Australia has had open capital markets… — Peter Martin, economics editor at The Canberra Times on his blog.
  • …there’s more than [state spending on infrastructure] at work in terms of the pressure on interest rates. In particular the strength of the labour market in Australia, with those 35-year lows in the unemployment rate and the stability of household income, but importantly, of course the ongoing boom in the resources sector. — Head of economics at Macquarie Bank, Richard Gibbs, reported in ABC News
  • It is a Howard government lie to allege that the states are responsible for interest rate pressure, without a good supporting case. I have heard no case; only a generalised political slur. It remains true, moreover, that the states did not promise to keep interest rates down; the Howard government did. In blaming the states, the Prime Minister is also implicitly conceding that he lied when he promised, as this is an admission of him not having had the power to do so. — Christopher Sheil, Club Troppo.
  • …we are now to be treated to an actual television campaign blaming the states for the raise in interest rates. All of it has nothing to do with economic management or good public policy: it is merely a re-election strategy, straight from campaign headquarters. Great way to run a country, eh? Tim Dunlop, Blogocracy
  • The University of Advanced Logic goes to great lengths to teach us that the more interest rates rise, the deeper the government ship sinks. But Mr Howard tells us that all this instability should give us even more reason to vote Liberal at the coming election. Nevermind the five interest rate increases; he can save us. — Rocco Fazzari, News Blog, Sydney Morning Herald

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Peter Fray
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