Wednesday, August 02, 2006

Rates up as predicted

The Reserve Bank of Australia have this morning announced the third cash rate rise since the re-election of the Howard government. The cash rate is now 0.75 basis points higher than it was at the 2004 federal election.

Hardly what voters expected when Howard assured them of his government's credentials as managers of the economy. One of two things must therefore be true, they aren't great managers, or the limits of their managerial control was overstated for effect.

It's mostly the latter. Government's tend to overstate their influence over the day to day peformance of a largely deregulated and globalised economy and this situation exemplifies the risks.


Seabee said...

We're part of the global economy and that's what determines interest rates. Politicians routinely claim credit when rates are low but say it's the world economy and they have no control when rates go up.
An accident of timing gave Howard the PMship at a time when world interest rates were at a historically low level.he had nothing to do with creating the condition.

backin15 said...

I agree mostly with you seabee.

Governments play a role but with deregulated financial/currency/trading markets, it's only one role.

Interestingly, every now and then NZ and Australia talk about a common currency but NZ are rightly anxious to avoid giving up what control they have over monetary policy. A number of commentators have talked about the dual economy in Australia, I don't imagine NZ want to make it a threeway split.