|Bob Katter - in power???|
OK, let's have some fun with this idea, shall we?
Bob Katter, hero of the rural man, and the old economy manufacturer, miraculously wins power. So then he claims a mandate to implement his policy of "simply lowering the interest rates to that of Europe or the United States.". What happens next? (After the markets stop rolling around on the floor of course)
Bob fires the Reserve Bank Governor and Board
|Pauline on the RBA!! lol|
The new Governor cuts the cash rate from 4.75% to 0.5%
What a great media story?
Average mortgage falls by $750 per month.
Well, the reality doesn't quite work that way. Rather than slashing rates by 4.25%, the banks only cut by 3.5%. Outrage! Why are the banks profiteering - Bob, you have to do something about it.
Borrow, borrow, bubble, bubble
After two years of consumers relearning how to save money, the Katternomics inspired new super-low home loan rates cause a frenzy. The banks try as hard as they can to stop people borrowing money, what with their recent credit downgrades, but they can't help themselves and the new sport on the street is lending money for houses to people who may or may not be able to afford it. But there aren't enough houses to buy, so house prices skyrocket.
The developers try their best, but they just can't build the houses fast enough. Capital city house prices increase by 20% in a year. Housing affordability is a thing of the past, and the natives are getting restless. Fights break out at auctions, and by the end of the year, desperate wanna-be home owners are protesting in the streets.
Nobody wants to be a miner
With so much money to be made in building houses, the developers increase wages to keep workers in the building trade. And so do the suppliers, and before you know it, Australia's inflation rate hits 7%. It's the highest rate since 1990.
And now the mining companies can't get workers because they are all back in the east building houses. So, the miners go to Bob and ask for an increase in migration. But Bob wants jobs for Australians, so he knocks them back. The miners can't deliver on their contracts to China, and now there's an international incident brewing. What's more, Australia's mining revenue is below budget because of the wages issue, and the budget deficit is spiralling out of control.
Sure, the dollar is falling - because the economy is disintegrating
International investors aren't too keen on Katternomics, so money starts to flow out rather than in, and the dollar falls to 80c. Bob's mates are thrilled - they are selling their wares overseas and making a killing. The manufacturers don't do quite so well. Even though they can compete a bit better on price, they haven't kept up with their competitors and can't break back into the overseas markets.
Now consumers all over the country are screaming. Everything imported is going up in price, and unless you are a builder you aren't getting paid more than what you were before. The budget surplus means that Bob has to reduce government spending so public servant numbers are being reduced. The economy is starting to slow down as a result, and so we've got rising unemployment and inflation. You can't afford your housing and all you see on the TV is a big hat and a few happy farmers.
A Grimm Fairy Tale
Thankfully, the chance of Bob Katter ever having control of Australia's monetary policy is about the same chance of Pauline Hanson being elected Prime Minister. And frankly, who knows what would actually happen under such a bizarre scenario - the picture I've painted might actually be an understatement of the debacle. The only thing it really shows is how insane it would be to revert to a pre-1993 economic policy, or worse.
Thank you Bob Katter for giving me a great laugh. For that is what you are - truly a laughing stock!
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