Profound ignorance displayed in interest rates fake outrage

Economic analysis in most of Australia’s media last week was more manipulation than information, as Alan Austin reports.

COMMENTARY from reporters, economists and sundry internet ratbags on last Tuesday’s interest rate rise revealed serious stupidity and malice.

3AW presenter Mark Allen was almost speechless trying to describe the frenzy of attacks against Treasurer Jim Chalmers by newsrooms after the Reserve Bank of Australia (RBA) modestly increased the cash rate target to the near-ideal 4.6%.

Said Allen:

“Every single paper is talking about the interest rates today... They are just absolutely pounding away on Jim Chalmers... If you want to have a bit of fun, grab The Australian and just read Greg Sheridan's analysis. It is just a magnificent spray of how pathetic and how, um, how insane some of their thinking is and trying to dress it up...”

That radio discussion was headed ‘Australians are TERRIFIED after RBA cash hike hits highest level in 15 YEARS!’

RBA rate rise risks turning oil shock into recession

The Reserve Bank has lifted interest rates to 4.6%, but higher rates cannot fix oil-driven inflation and risk deepening an economic downturn.

The hyperventilating and fear-mongering was even more unhinged at News24. Jame Macpherson claimed the decision delivered a “brutal blow to Australians”. Chris Kenny said the rate rise “pushes households and businesses to the brink”. Rita Panahi wailed that the rate hike would “send some people over the edge”.

All hilariously hyper-emotive and entirely false.

Several Coalition frontbenchers attacked the Government with equally ridiculous lies and smears. As they will be irrelevant to anything for at least the next two election cycles, they can be ignored.

Rate still historically low

If interest rates at 4.6% are “terrifying” and “devastating”, how would those shonks describe rates at 6.7%? John Howard delivered that. What terms would they use for 14%? That happened under Bob Hawke. And what about above 19%, which Malcolm Fraser experienced, or higher than 23%, which Bob Menzies served up? See chart below.

The reality is that 4.6% is right for the times. Anywhere between 3.75% and 5% is fair to both savers and borrowers. In denying this, Australia’s media has plummeted to another all-time low in malicious misinformation.

Ignorance of the plight of savers

Children in the 1940s, '50s and '60s were encouraged to save for future prosperity. The State Savings Bank gave us free money boxes into which we could easily slide coins, but never shake them out. Grrrr!

Thus began lives of thrift with a comfy old age anticipated. Many retirees, before universal superannuation, had sufficient savings in term deposit accounts to live off the interest.

For almost all of 1980 to 2013, term deposits earned between 5% and 10%. Thus a couple with $500,000 could receive between $25,000 and $50,000 annually — adequate for a comfortable life, more than double the age pension and, importantly, no burden on taxpayers.

This, of course, relied on the RBA’s cash rate target staying at or above 4.72%, which it did for all but eight of the 219 months from August 1990 to November 2008.

Then, through the aftermath of the Global Financial Crisis from 2009 to 2013, interest rates fluctuated between 3% and 4.75%. Low, but not disastrously so.

Then came the worst economic managers in the history of Australia, if not the entire Westminster world: PM Tony Abbott and Treasurer Joe Hockey, followed by Malcolm Turnbull and Scott Morrison (after they were sacked by their own side), and then – worst of all – Morrison and Josh Frydenberg.

For the entire six years from August 2016 to July 2022, interest rates were below 1.51%. For an appalling 18 months, they were at or below 0.11%. The three-year average term deposit rate fell in 2021 to 0.3%, giving savers with a million dollars in the bank an annual income of $3,000.

This drove many Australians into poverty and homelessness and exacerbated all the other disastrous outcomes of that dreadful period of incompetence.

Now, at last, interest rates are in the optimum band, and the craven anti-Labor commentariat slam this as ‘an onslaught of punches’ and an ‘act of vandalism’ and the ‘RBA’s incompetence’.

Truths about price rises they don’t want you to know

As inflation in Australia is steadily easing, misinformation is relentlessly worsening.

Analysis riddled with blatant lies

Controversial online commentator Leith van Onselen said last Friday:

“Australia’s got the second-highest trimmed mean inflation rate in the advanced world behind Norway. And now we’ve got the second-highest mortgage rate in the world, behind Iceland.”

Pure fabricated nonsense. Trimmed mean, or core, inflation in Australia is 3.57%. It is 3.6% in Latvia, 6.7% in Iceland and 30.07% in Turkey. Norway’s trimmed mean is only 3%. These are all advanced OECD members.

Australia’s core inflation ranks eighth-highest in the OECD, not highest or second highest as several newsrooms mendaciously repeat. The OECD average is 3.46%.

Mortgage rates are now 5.8 to 6.5% in Australia. Rates are higher in the USA, Hungary, Mexico, Colombia and Turkey — all advanced economies.

So how many of the 38 OECD nations have interest rates in the optimum range of 3.75% to 5%? All of them? Only half?

The answer is four: Norway, Chile, the USA and Australia.

Why the constant misinformation?

Of the 20 most important global tables of economic outcomes, Australia is now at or climbing towards the top on 19.

In comparative terms, Australia is a leader on job creation, exports growth, debt repaid, corporate profitability, business investment, GDP growth, personal wealth, equality of wealth distribution, credit ratings and many others. The only significant variable on which Australia is still in the bottom half of the tables is inflation.

This frustrates and angers the anti-Labor forces who have only one point of attack.

Simultaneously, the two Coalition parties which the newsrooms have been spruiking fanatically for decades look like they are being destroyed — not by Labor, but by One Nation.

There is every chance the latest rate rises will control inflation and have Australia winning on 20 out of 20. Let’s see how the newsrooms spin that.

Alan Austin is an Independent Australia columnist and freelance journalist. You can follow him on Twitter @alanaustin001 and Bluesky @alanaustin.bsky.social.