There have actually been three interest rate decisions this week but you have probably only heard of one of them.
The infamous one is the Reserve Bank’s decision to raise interest rates which will add around $1000 per year to the mortgage repayments of an average homeowner.
Australia is one of the few developed countries in the world where interest rates are increasing. That is because Australia has the highest inflation rate in the developed world. Indeed, all other developed countries, except Australia and the UK, have inflation below 3 per cent.
Thanks to a government that is addicted to spending, Australia has let the inflation genie out of the bottle. Just before Christmas, the Government released a budget update that showed that spending on existing programs had blown out by $50 billion. This is the biggest blowout in expenses ever, by far.
The previous two records were also set by Labor’s hapless Treasurer, Jim Chalmers, in the previous financial year. Over the past two years Labor has underestimated spending by $120 billion. If A Chief Financial Officer of a major company had presented figures to the board that were wrong by $120 billion, he or she would be sacked. Why is there a different rule in Canberra?
The day before the RBA lifted interest rates, the Government announced a different interest rate decision. Labor announced that it would provide taxpayer funding to cut interest rates on loans provided by Hyundai and Kia.
Under this scheme, people will be able to buy an electric car at an interest rate of 0.5 to 1 per cent lower.
Why are poorer people’s taxes going to richer people who can afford a new car? Why do those who can afford a new car get an interest-rate cut on a car loan, but those who are struggling to stay in their own home face an interest-rate increase?
Why are we subsidising the purchase of cars Made in Korea while the extra government spending makes it harder for people to stay in their home Made in Australia?
The day after the RBA’s interest rate increase, Labor announced its new Net Zero Fund and said that investments from it would only be charged an interest rate 1 per cent below the government bond rate.
This fund had previously been required to charge a rate 2 to 3 percentage points above the government bond rate.
By issuing loans below the rate at which the Government borrows, Labor is effectively willing to make a loss on investments in solar and wind energy.
The investments in these large scale renewable energy projects cost billions of dollars. They involve the installation of equipment largely made overseas, by companies that are based overseas.
Why are our taxpayer dollars funding lower interest rates for them, and not relief for Australian homeowners?
This week has been the tale of three interest rate changes. Two interest rate cuts for Labor’s friends who are as obsessed about net zero as them. And, an interest-rate increase for average Australian families that Labor says it can do nothing about.
But these interest rates are connected. The taxpayer dollars that go to the big solar and wind investors, and the electric cars, all add to total demand. All of it pushes up inflation and leads directly to the increase in interest rates that other Australians have to pay.
We do not live in a world with infinite resources. If you push more resources into one thing (green, net zero stuff) that means there are fewer resources to do other things (like build homes).
This week has revealed the Labor Party’s priorities. It cares more about its pursuit of net zero than it does about Australian families struggling to pay a mortgage.
When Australia signed up to net zero, we were promised lower interest rates. The idea was that our commitment to net zero would lead to lots of green investors flooding Australia with money and that would push down interest rates.
The reality has not matched the promise.
Instead, Australia now has the highest interest rates in the developed world because net zero has hypnotised Labor into thinking it could ignore the laws of economics.
It is time Australia escapes from its green fairytales and returns to the land of common sense, which demands disciplined spending, a focus on priorities and making decisions to help Australian people above all else.
