Wednesday, October 08, 2008

rate cuts

So the RBA has slashed interest rates by 1 percent. Only months ago we were being told that no such thing would happen until downward pressure was being applied to inflation. Now the view appears to be that a dramatic slow down in the economy will do that job for us, and so we say "fair thee well" to that little political hot potato. Surely recent events highlight the emptiness of the political debate surrounding "inflationary pressures", and the effect the Australian government has on interest rates. In a globalised economy, and conditions as they are, it is fairly safe to say that the government can neither help nor hinder such things .. at least within the marginal issues in which the debate gets bogged in. We should keep this in mind next time we hear Wayne Swan taking credit for an interest cut, or Turnbull blaming the government for an interest rise.



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