Saturday, 4 August 2007
If there is any clearer sign that Howard’s attack on the states is not a ‘new federalism’ but a sign of chronic weakness at the centre of power, it is his latest move to blame the states for adding pressure to interest rates. Wasn’t the control of interest rates supposed to be the federal government’s job? Indeed, wasn’t the coalition’s supposedly better control over interest rates a key plank in their re-election? Now that the government has effectively passed responsibility for interest rates to the states, what conclusion is the voting public supposed to take now, vote out the state governments?
In reality the government’s control over interest rates has always been a bit of myth ever since the Australian government deregulated its financial markets and handed over what little power it had to the Reserve Bank. The political role of interest rates in Australia nowadays looks over-rated. Its impact in the last election on the question of ‘trust’ was only possible after the question had already been raised over the more important issue of Labor’s attitude to the US alliance. That issue is now of less concern for Labor (indeed Haneef shows it is the government that is struggling with trust on national security), so it will be hard to make the interest rate argument stick.
Interest rates have been raised in this election over housing affordability but this is more Rudd tapping into an anti-politics feeling that the political class is out of touch than reflecting a real squeeze across the electorate. The interest rate argument has also been pushed by commentators such as The Australian’s George Megalogenis, but this just looks like a way to salvage the old prejudice that the Australian electorate can’t think beyond its hip-pocket in a year that despite buoyant economic conditions, the government is heading towards defeat.
Posted by The Piping Shrike on Saturday, 4 August 2007.Filed under State and federal politics