Citizens Electoral Council of Australia Media Release Wednesday, 4 February 2015
Interest rates at red alert level: This is not a drill!
Yesterday’s rate cut by the Reserve Bank is a screaming emergency siren alerting to a serious crisis in the Australian economy.
The authorities aren’t saying there is a crisis, the Liberals’ “debt and deficit disaster” propaganda aside.
(Of course, the population is screaming that there is a crisis, every time they vote now, Queensland being the latest example—voters are punishing every first-term government that ideologically imposes policies which add to the economic pain in the community.)
But by slashing rates to 2.25 per cent, the RBA is signalling that the deep crisis in employment, production, and economic activity in Australia is spiralling out of its control.
The current 2.25 per cent is three-quarters of a per cent lower than the low of 3 per cent that interest rates reached during the 2008-09 global financial crisis, which then-Treasurer Wayne Swan called “emergency” levels.
It also means that the so-called “real” interest rate, which is the interest rate minus the official inflation rate, currently around 2.2-2.4 per cent, is effectively zero!
The RBA is sweating bullets. It hopes that slashing rates will stimulate exports, by pushing down the value of the Australian dollar; stimulate consumer spending, by freeing up disposable income; and—the big one—stimulate house buying, to keep the housing bubble propped up.
In the case of the housing bubble, the RBA knows that if the job losses in productive industries such as car manufacturing, smelting and refining lead to a sell-off or even slow-down in the housing market that pops the bubble, the banks will crash and take the rest of the economy with them.
The crisis the RBA is responding to is not an “Australian” crisis; it is the ongoing global financial crisis impacting Australia.
The CEC has repeated many warnings of experts that a new, more devastating phase of the global crisis is looming, which could be set off by such threats as Europe’s debt crisis, the blow-out in $20 trillion of derivatives speculation on the price of oil, or any combination of those and other factors.
The Australian government must immediately act to protect the ongoing functionality of the financial system and economy by imposing a Glass-Steagall separation of retail banking from speculative investment banking.
This separation will enable the government to protect the retail banking that services the real economy, so that only speculative investment banking is exposed to future crises. It will require breaking up the Big Four too-big-to-fail banks into separate retail and investment banks.
The government must also act to revive and revitalise Australia’s productive economy and industrial capacity, by establishing a national bank that can direct public credit into great nation-building infrastructure projects.
Such projects will breathe new life into many productive industries, including steel and machinery manufacturing, and create hundreds of thousands of high-skilled, high-wage full-time jobs.
we've been in trouble since the budget was handed down last year really. I've never before seen a govt talk down an economy so much that people stop spending it was a seriously dangerous thing for them to do
The economy has been in trouble for a lot longer than a year, I have been saying this for a few years now and everyone just said I was a downer.
well now you would have to be deaf blind and stupid to not see we have a huge issue.
As for dropping interest rates to stimulate the economy that's BS, there is little left to stimulate.
People need jobs, without jobs people don't have money to buy things and banks wont lend the cheap money to people that don't have jobs and the smart people with jobs wont be borrowing money to spent in case they lose their job next week.
Business has left the country, the farmers have been abandoned, the people are being ignored by arrogant Government.
The situation needs to be turned around and I dont see that hapening, we are going to be a third world country and our children will be a slave to China.
the lucky country has run out of luck, it now needs good managment and sadly our polititions are not up to the job as they are too focused on the short term job of winning votes and not the long term good of the country
the lucky country has run out of luck, it now needs good managment and sadly our polititions are not up to the job as they are too focused on the short term job of winning votes and not the long term good of the country
And when we had one that wasn't on the short term they got mercilessly attacked and trashed.
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