Melbourne Cup day rate rise would be a bad bet

We are still well short of the “Misery Index” (aggregate of inflation and unemployment) figures which symbolised the grinding stagflation of much of the 1970s and 1980s, but the signs of stagflation are already apparent in the Australian economy.

Anyone who lived through that period and recalls what it was like and, even more to the point, the protracted effort and sacrifice it took to overcome it, will understand that a full-blown repeat is to be avoided – even if that does mean a degree of sacrifice in the short to medium term.

As others have noted, the federal and state/territory (and, indeed, local) governments are making the problem worse through overspending – something they have been doing for many years, under both sides of politics, which is why the degree of restraint now required will be that much harder to sell to Australian voters.

The good news is that it has been done before, and a PM who cheekily claims to have been an economic advisor to the Hawke/Keating government should have first hand insights into the sorts of carefully targeted taxation, welfare and incomes policies which will be required to deal with our economic challenges and ameliorate the worst impacts.

Economists are not betting on a rate rise, they are predicting the RBAs decision based on many of the trends listed below.

The share market, bond and money traders bet on certain outcomes.

It would be a good idea for Ian Bushnell to clarify any personal interest he and his family has in the RBAs decision, so readers have a better understanding of where he stands to benefit or not.

A substantial interest rate increase is a sure bet and it will help reduce inflation by boosting the value of the Australian Dollar which is needed to buy about 90% of our imported consumables including petrol and diesel.

Is the author aware that a lot of us had to pay mortgage interest rates above 15%pa about 30 years ago? We survived and so will the current mortgagors.

“The government is already doing some things to mitigate prices, such as increasing rent assistance and electricity rebates”

If by mitigate, you mean to make it worse then yes, the government is “mitigating” costs such as rent and electricity prices.

Basic, first year economics Ian. The government handing out more money simply increases the capacity within the market to pay increased prices and the market will adjust accordingly, just as it always does.

Think, childcare subsidies… and the cost charged for childcare skyrockets, housing grants… and the cost of housing stock increases to match, private healthcare rebates… and the prices skyrocket. Are you seeing a trend here yet?

All these schemes that utilise tax payer dollars manage to do is make large companies and private investors rich while prolonging and exacerbating the problems they are attempting to “mitigate”.

The end result leads to all this extra money flowing around the economy, it overheats and leads to further inflation, which causes interest rates to rise and causes more pain. Much of the issues that we are currently having with inflation currently are directly caused by Federal and local government spending.

…you might want to stick to whatever your normal area of speciality is, as economics clearly isn’t it.

I don’t bet, but:

1.

The Reserve Bank has a single task of bringing inflation under control, and it has failed to do so for as long as almost a year now. The whole nation suffers as the result.

2.

The real estate interests have effectively hijacked the setting of national economic policy.

3.

Drastic economic measures are needed in order to re-instate Australian national sovereignty. Unless we do so, the nation, especially the middle class, will be plundered and pillaged and we will really become a “banana republic”. The pains of implementing such measures will not be spread evenly across the whole of the society.