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Sunday, October 17, 2004

Where's my Lithium: Costello

It's not only bi-polar Pete that is forecasting tough times ahead (weren't oil prices high before the election too?). BIS Shrapnel is predicting a recession in 2007/2008 due to lack of business investment and skilled labour. One cannot believe the credibility of this report as it also estimates that interest rates will rise to 8% by late 2006. As you have been told (and told and told), this is an impossibility under a coalition government, especially as this would be higher than the 7.5% (on a downward trend) that Howard inherited from Keating.

BIS predicted a recession before the election where, of course no one took notice.

I am not of the 'you voted for Howard so I hope your interest rates go skyhigh and you lose your house - you bastards' school of thought.

However a recession in 2008 will not help Labor in 1007. And as stated in other blogs the Coalition can play the card that 'it is not our fault is the global economy'. And the myth that the Liberals are better managers of the economy is so entrenched that they will run the line that you can't elect a Labor government to ride a recession.
hmm. If the economy is going down the crapper, why would they put interest rates up? The reason interest rates have been low for the past n years is that we were staving off a recession and fuelling growth on the back of housing... the US interest rate is even lower than ours was because they were really keeping the wolves at bay.

Strong economy means there's no need for expansionary interest rate levels, which means they go up.

Maybe that would have been a good slogan for Labor: We'll tip us into a recession to keep interest rates low. :)

But Guido is right, the Libs will spin the recession as being about oil/terrorism/trade/the UN/unions/gays/whatever and we'll be told not to switch horses mid stream because you can't trust Labor with a recession. You need a firm hand at the tiller and a man of steel as an anchor.
I certainly don't want interest rates to rise, but they will no matter what. Interest rates are typically used as a sludgy lever on the economy, but managing debt risk is another factor. Too much borrowing and bad debt is not good, so interest rates rise.

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