tag:blogger.com,1999:blog-14237465.post4461553243062924532..comments2024-03-22T19:12:22.089+11:00Comments on One Salient Oversight: Advantage Australia?Neil Cameron (One Salient Oversight)http://www.blogger.com/profile/03143948543305522865noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-14237465.post-80421886250484866192008-03-04T18:10:00.000+11:002008-03-04T18:10:00.000+11:00So, if only 1/3 of Australians have a mortgage, ho...<I>So, if only 1/3 of Australians have a mortgage, how does using interest rates have a dampening affect.</I><BR/><BR/>Interest rates affect more than mortgages. The reason why there is so much focus upon mortgages is because it is an emotional subject and because so many people have them.<BR/><BR/>By raising interest rates, the reserve bank is essentially removing money from the economy. It is a way of controlling the money supply to ensure that inflation doesn't get out of control.<BR/><BR/>So money is certainly being taken away from mortgagees, but it is also being taken away from credit card holders and anyone who wishes to borrow money.<BR/><BR/>Increased interest rates also give more incentives to save. Go to your local bank and you'll see cash management accounts and term deposits increase their rates, rewarding people who save money they could have spent.<BR/><BR/>Inflation is essentially money being devalued. By raising rates, the reserve bank ensures that money retains its value, which will be felt in lower inflation.<BR/><BR/>Much of Australia's economic growth since 1996 has been driven by intelligent fiscal policy by the federal government, along with a clearly mandated responsibility on behalf of the reserve bank to control inflation. Nothing has changed since then except that the government has changed.Neil Cameron (One Salient Oversight)https://www.blogger.com/profile/03143948543305522865noreply@blogger.comtag:blogger.com,1999:blog-14237465.post-55017749709481504012008-03-04T16:29:00.000+11:002008-03-04T16:29:00.000+11:00In 1994 they increased official rates by a full pe...In 1994 they increased official rates by a full percentage point.<BR/><BR/>I reckon if the RBA had the guts, it would increase it by at least one half. That will shock most people into not spending and hopefully slow things down.<BR/><BR/>So, if only 1/3 of Australians have a mortgage, how does using interest rates have a dampening affect.<BR/><BR/>A lot of talk on the radio is suggesting that the Interest Rate tool is like trying to drive a car with 1 wheel powering it.<BR/><BR/>It's funny though, when interest rates were being dropped a number of years ago, there was no talk at the time of it being a useless tool in driving the economy.Reuben Kincaidhttps://www.blogger.com/profile/12715319021106231910noreply@blogger.com