Tugging the old leash

J Howard launches his campaign laying on with a trowel his “warning”:http://www.theaustralian.news.com.au/common/story_page/0,5744,10606700%255E12377,00.html that a Labor victory will bring higher interest rates and that only the conservatives can be ‘trusted’ to keep them low. Is this attempt to take credit for the one economic variable—interest rates—that he and his Ministers do not control misleading? Probably not by the standards of recent political debate. But it does seem to be a tired tug at the old pavlovian bell-pull: Labor government = wage rises = interest rate rises = mortgage burdens. Many factors influence where the Reserve Bank pitches interest rates, but “in the recent past”:http://www.econ.usyd.edu.au/drawingboard/digest/0007/bryan.html they have been predominantly international and financial factors (including exchange rates) rather than domestic factors such as labor or asset prices. In brief recent “pronouncements”:http://www.rba.gov.au/Speeches/sp_gov_040604.html the RBA Governor has maintained his view that domestic price inflation is not expected to be a significant influence on decisions about rates. In fact, there is every reason to believe that Latham’s Labor has a more “austere”:http://institutional-economics.com/ fiscal policy than the baby-bonus-boosting Conservatives. Pull the other one, JH.

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