Sunday, November 04, 2007

Inflation - it's not my fault says Howard

On Wednesday, we will find out if the Reserve Bank lifts interest rates yet again. It would be the 6th interest rate rise since the last election. John Howard promised voters keep interest rates "at a record 30 year low".

Today, he told the ABC there are some factors that might lead to another interest rate rise: the strength of the economy, which he manages; the growing price of oil, and the drought (which is affecting food prices).

But, as with most political statements, it is what John Howard is NOT telling us that matters. In determining the underlying rate of inflation, the Reserve Bank discounts the effects of items seen as volatile, including the price of oil, and of food.

That leaves John Howard's contribution - the "strength" of an overheating economy; an economy managed by his & Peter Costello's budgets. Within hours, Mr Howard promised to pump an extra $10 Billion into the economy, as he tried to buy votes in the politically important areas of Sydney, Victoria, and south-east Queensland. These are areas with electorates he must retain to continue his (otherwise) unannounced agendas.

There are two elements in the fine print, though: the road/rail funding is targeted till 2020 - 4 government terms away; and it is as though he wants to ensure that inflation continues to grow, whatever the outcome.

Economically responsible - you bet it's not!