Mark Twain is reputed to have said that you should never pick a fight with people who buy ink by the barrel. In modern terms that should include never pick a fight with people who can rebroadcast what you say. Assistant Treasurer David Bradbury made that mistake this morning and an extraordinary exchange with Glenn Daniel is being replayed across Sydney radio and the print media.
Elections are stressful events to be sure, but accusing journalists of partisan bias and then demanding their names - for what purpose? - is an unusual style. It guarantees that the exchange and not the message becomes the story.
Glenn Daniel should be congratulated - rather than simply accepting on face value what he was being told, he asked the tough questions. As Minister Bradbury admitted, “This is extraordinary. I’ve never experienced anything like this.”
The point of the story is that Bradbury was unprepared and a journalist, doing his job, caught him out. Let’s see more journalists holding politicians to account on interest rates.
Low interest rates are not automatically ‘good’ for the economy. If they were why not simply reduce them to zero? Similarly ‘high’ interest rates are not automatically bad. Think of the Goldilocks principle - not too low, not too high.
More importantly the RBA cash rate is not the interest rate that people should be keeping an eye on.
They should look at their home-loan rate, or the small business overdraft rate, or their credit card rate. They should also look at these rates on average over time. After all home loans are paid off over decades.
To get a feel for these sorts of numbers I downloaded some data from the RBA and calculated averages for the 11 years of the Howard era and the six years of the Rudd-Gillard era. The graph below shows the standard variable home loan rate for the period April 1996 - July 2013 with Howard in blue and Rudd-Gillard in red.
The average standard variable home loans rate in the Howard era was 7.24% compared to 7.29% over the past six years. On average, much of a muchness. Small business has paid more, on average, for overdraft facilities in the Rudd-Gillard era (10.08% v 8.87%) and letting your credit card max out has been a lot more expensive over the past six years (19.26% v 16.27%).
Eyeballing the figure I reckon having the variable home loan rate in a range between six and eight per cent is more or less the norm over the last 15 years or so.
Politicians making cheap points about the RBA cash rate doesn’t add much value in a policy sense. To be sure John Howard and Peter Costello were good at this, but it didn’t add much value then either. Rather than use interest rates as a proxy for the economy, politicians should talk about the economy directly.