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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