06
Aug
13

The Election Silly Season: Thoughts of Interest.


Australians are heading for a Federal election early next month and the silliness has started.

I clearly remember the rhetoric from previous elections regarding official interest rates. The standard Liberal party line insisted that there would always be lower interest rates under a Liberal government (presenting this as a good thing). Reference was always made to the 1980s when under the previous Labor government interest rates had skyrocketed during a period of recession.

Today the reserve bank are predicted to lower interest rates and I’ve seen that the Liberal shadow treasurer has said that lowering interest rates would be a bad thing.

Now personally I’m relatively uneducated when it comes to the economy – but I’m very familiar with political spin. Can I assume that politicians are confident that the average person has such a short memory that they won’t notice a 180 degree turn around in attitude?

In the last days of the former Liberal government lower interest rates were GOOD:  “vote for us and be guaranteed lower rates than Labor can deliver”. Clearly, when interest rates are at an all time low such a message can’t be used anymore .

Now my views on interest rates:

1) High interest rates are bad for those struggling with mortgages.

2) Low interest rates are bad for those relying on investments during their retirement.

3) Low interest rates may SEEM to make home ownership more accessible to those trying to buy their first home, but in reality low rates helps to push up property prices – thereby increasing the mortgage burden when rates inevitably increase again.

4) Even small interest rate increases can be crippling when larger amounts of money have been borrowed.

Am I writing this from an anti-Liberal, pro-Labor bias?

No. It is most likely I will vote for the Liberal candidate in my local area – Labor have yet to field a viable candidate who they are willing to invest time and money to promote. However given the choice between current Prime minister Kevin Rudd (Labor) and leader of the opposition Tony Abbott (Liberal),  I’d lean towards neither.

If given my choice I’d like to give Malcolm Turnbull a go – I don’t see a worthy candidate on the Labor side.

 And what about interest rates?

High is bad, low is bad – ideally there would always be a mid-range rate that suits self-funded retirees as well as new (and prospective) home buyers.

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