ALP bounces on rate cut speculation

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I’ve noted many times before the relationship between interest rate trends and the popularity of the incumbent government. It’s not rocket science. In a country flooded to the gunnels with mortgage debt, what would you expect?

Roy Morgan is out today with more evidence that that is the case:

RM do not usually include rate cuts on this chart so maybe they’ve been reading me. Then again, like I said, it’s not rocket science.

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This is another example of the difficulty faced by the sane policy and business leaders of this country who wish to steer it away from its debt addiction. I argue regularly that the Gillard government has no choice in fashioning a Budget strategy that demostrates a clear path to surplus owing to the ratings agencies acknowledgement that the Budget is now the key stone in the private credit system via implicit guarantees to the banks. But, there is also little doubt the government would do it anyway as a poltical strategy to ensure the lowest possible interest rates in the casue of re-election.

Of course, as we know, from the sectoral balances of GDP, in an economy running a current account deficit, government saving ipso facto means private sector dissaving or borrowing. So much ragged structure still sits between Australia and a sustainable economic future.

Still, I draw hope from the people who, also according to Roy Morgan, see the economy as the most important problem facing the country:

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Here’s to staying negative (prudent that is).

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.