Aug 062007

"What I know is, we’re up against a very clever politician, a very cunning politician," – Kevin Rudd on John Howard
Poll-driven PM’s ’given up governing’: Rudd – National –

So, what do you really think, Ozblogosphere? Let’s put aside our petty ideologies for a mo and think about the national interest. After all, isn’t that what John Howard would exhort us all to do? Just how are you all feeling about this circus sideshow we’re told is democracy?

I don’t know about the rest of you, but I’m so bloody tired of this daily desperation play after desperation play by the PM that I’m on the verge of not listening to PM on the way home in the evening. Damn huge statement, let me tell you! This latest piece of transparency just about takes the cake away while icing it at the same time. State government borrowings place fiscal demand pressures on financial avenues used by private enterprise, thus forcing up interest rates. Well, I never!! That’s a new one on me. It’s also a new one on the world’s largest banking group, Citigroup. In fact, Citigroup claim that without State-backed borrowings infrastructure levels in this country would be much worse off than at present and the country’s economy as a whole wouldn’t be where it is today.

This brings about another train of thought, whereby one wonders if a lack of spending by the Commonwealth on infrastructure in order to procure the much vaunted budgetary surplus has forced State governments into this funding on a wider scale? Is this all a part of some Machiavellian plan by the feds to make themselves look good, while building up the evidence for State borrowings to make the all-Labor States look bad? Seems too bizarre for words, but stranger things have transpired in Oz politics over the last 11 years.

Sly conniving by the clever old man who everyone supposedly thinks is a liar aside, it’s an argument which simply doesn’t hold water. If the Commonwealth hasn’t been shelling out as it ought, then which other arm of government is the next capable? Why would the States not spend on infrastructure, as that infrastructure aids the filling of their own coffers through economic expansion. The GST, as we’re so often told, is the States cash cow, so why wouldn’t they ensure that all possible avenues are exploited in order to maximise the GST take? If improving infrastructure is what’s necessary, then so be it. It’s likely that the borrowings for and spending on infrastructure haven’t been as well targeted as possible, which is probably where the Rudd plan to refine the SPP process comes into play. But as for State-backed borrowings creating interest rate pressures by denying private enterprise access to borrowing opportunities……..sheer fantasy! One need only read through the Australian Bureau of Statistics, Australian National Accounts: Concepts, Sources and Methods – 2000 in order to gain some modicum of understanding as to how the varying levels of governmental authority obtain funding. Clearly, it’s vastly different to how Mum’s and Dad’s do it.

Anyway, what’s to be so concerned about if the RBA do opt to raise rates another twenty-five basis points at tomorrow’s meeting? Means your cheapest home loan will go from 7.20% p.a. – or thereabouts, to 7.45% p.a. which on the basis of the mean average Australian home loan of $225,000 requires an increase of $41.33 per month over forty years. Yes, that’s right people…….forty years. If your favourite flavour of lender doesn’t offer maximum terms, then time you selected another one which does. Maximum term doesn’t mean you’re shackled to it, only that you have breathing space while and when you need it. Don’t be afraid to ask, you’re entitled to the option. At the end of the day economic fluctuations run in cycles. What we’re seeing currently, we saw in the 1980’s. These days the ebbing and flowing of rates is moderated by the reforms of the Keating era but the cycles remain, even though longer now. Whenever there’s a rise, there must be a fall and vice versa. Action and reaction.

There are those who over-indulged when rates were really low, and those who allowed themselves to be conned into ’opportunities’ while the hype said milk and honey would flow forever. There are those who have fallen on hard times and quite frankly, dear reader, there will always be the greedy, the gullible and the unfortunate. As a society we cannot be held responsible or made to compensate for those minorities. We are responsible though, for prudentiality in our own fiscal endeavours and circumspect research into inviting possibilities. We expect such virtues of our elected representatives. Why shouldn’t we expect the same of ourselves? Interest rates are not to be feared. It’s those who choose to ignore them who deserve to be feared.

  One Response to “What are you afraid of?”

  1. “…a lack of spending by the Commonwealth on infrastructure in order to procure the much vaunted budgetary surplus…”
    which is purely ideology driven – ‘we’re Liberals’ it’s wot the Right does’ – nowt to do with “.. a part of some Machiavellian plan by the feds to make themselves look good..”
    waayyy too much credit given to think 3/4 could even spell Machiavellian even if the other 1/4 thought it was a new Starbucks’ flavour.
    NO it is simply the brain dead belief that the market will supply all – which is why we have so many plumbers, scientists, technicians that 457 visas are a left wing phantasy.
    And don’t forget the strongest, (though smallest) union of all, the AMA which throughout the 80/90s where bribed into not sabotaging Medicare with Bulk Billing and allowed to drastically restrict the numbers in mediacal training.
    Dr Hannef or Dr Patel anyone?
    Finally,”… has forced State governments into this (infrastructure) funding..”
    If only they would! Don’t know about Brisbane but anyone with the unconcerned luxury of listening to morning & evening traffic reports in Melb/Syd knows they haven’t spent a zac more than aboutsolutely unavoidable on roads nor train/bus services which would obviate the road works.
    Except for PPFs like beltways & undercity tunnels, each one a cash cow for the privateers and utter failures for the motorists.

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