So the Reserve Bank of Australia is being cajoled by the government into lowering interest rates to juice the economy.
Gillard’s foray into the RBA’s Monetary policy, leads me to believe that Labor has just realized the bush fire of collapsing assets values and rising inflation that is engulfing its electability. Add to this the suicidal Carbon Tax. In fact the carbon tax is the lightning rod for every inflationary impulse on basic goods and services. I refer readers to my previous articles exploring labors strategic folly. A bridge too far, and The government runs out options.
Frankly, it is Tony Abbott’s luck that he was in government while Howard and the RBA induced a credit bubble in housing. Of course, in bubbles everyman and his dog is making good money on the silliest of economic pretenses. It’s a case of, Everyone wins, especially a government looking for re-election. Labor came into power on the tail end of this paradigm. A brief look at the debt level of Australia shows a private debt that overshadows its public debt. A majority of this debt is mortgages, usually by tradies negative gearing and hoping to flip the house to their neighbor. See Steve Keen for more gory Australian debt metrics.
America’s now popped credit bubble was also indirectly contributing, the money ultimately flowed through China’s factories. In a sense Australia is a derivative of Chinese industry and American consumption. Lax monetary policy on the part of both China and America has contributed greatly to the already pumped Australian Housing sector.
This is all unwinding and Labor is paying the price. Abbott can now, like a guerrilla, fight an un-winnable attrition war around these costs of living pressures. Only in the twilight of the Labor government’s power has Gillard grasped the hopelessness of the situation and made a lame attempt to push the RBA into re-inflating assets values, reducing mortgage repayments.