Impact of Interest rates on Wages

By: AlanK (Registered ) on 07-11-2007 23:59

http://www.abc.net.au/7.30/ content/2007/s2084263.htm 
This is the internet site for the full transcript of last night’s interview on the 7.30 Report, for those who may be interested. 
 
Transcript 
KERRY O'BRIEN: So how will this latest interest rate rise impact on mainstream Australia? The Housing Industry Association says today's rise will "see more than 650,000 Australian households caught in the grip of mortgage stress". Dr Steve Keen is an academic economist at the University of Western Sydney who has done substantial research on Australia's debt levels, both household and business debt, with a monthly report called Debtwatch. He joins me now. 
 
Steve Keen, how will this rate rise impact on various mortgage belt households around Australia? 
 
STEVE KEEN, ECONOMICS, UWS: Well, it is going to make what might look like a fairly minor increase in the amount of money that has to come out of the household budget that has to pay the new level of average mortgage payments just in term of the interest payments that are made on the mortgages. It's going to go from 11.4 cents in the household dollar just to pay the interest on mortgages to 11.7. Now that doesn't look like very much but if you go back and history and take a longer view and, say, what was it like 30 years ago in 1977, it was two cents in the dollar, so we're talking virtually six times as much. You go back to 1990 which is when we had those of course, astronomically high nominal interest rates was 4.5 cents in the dollar. So even though we've go a substantially lower rate of interest now, it's almost three times as much coming out of the household budget to cover interest payments, and just since the 2004 election, we've gone from eight cents in the dollar to now about 11.7. So almost 50 per cent higher again than during the 2004 election. 
 
And on it goes. Who said that history lessons can not be informative and instructive!

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Pork Barrelling

By: geoffreykelley (Registered ) on 08-11-2007 01:01

When it comes to pork barreling I don't think we have seen anything yet! My prediction is that both parties will reach 100 billion before the big day. 
I think back to the 1993 election and remember how the naive Dr Hewson prepared the most comprehensive planning and policy document ever in the history of this nation. Over 500 pages telepgraphed like punches to the enemy, Keating. 
Keating and the ALP lied for six months about "Fightback" and the GST. Keating introduced L.A.W. legislation and then did a Garrett as soon as he won. 
In the last week of the election Keating pulled all his lies into perspective and thundered to the confused electorate, "If you don't understand it DON'T vote for it!" 
Of course the confused electorate did not understand it because of the lies by the ALP and the press. Does anyone remember Conrad Black promising favorable electoral comment in return for another 15% of Fairfax? The SMH and "The Age" honoured their master's voice. 
In the last week of that election, fought on economic credibility, Keating spent SIX billion dollars pork barreling! 
No Labor team has gone to an election since 1993 witout releasing their policies in the last few weeks. Beazley even went to the 2000 election WITHOUT some policies, notably Immigration! 
 
All we really need to know about political campaigning in Australia is two things, lie like buggery and pork barrel! That is how you win an election! 
 
Geoffrey Kelley

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7.30 Report Dr Steve Keen

By: geoffreykelley (Registered ) on 09-11-2007 02:09

AlanK, I don’t wish to denigrate Dr Steven Keen any further than to say he is an obscure academic from the Univ. of Western Sydney. And furthermore, you said,” but, I doubt if he could fool ALL of his colleagues ALL of the time…….”. Actually he hasn’t fooled all his colleagues all the time. Here is a quote from Wikipedia,” Keen's full-range critique of neoclassical economics is contained in his book "Debunking Economics." Some reviewers of the book, neoclassical or otherwise, contend that Keen has not shown what he claims and that he is making exaggerated claims for his research, most of which is based on a misunderstanding of economic theory.” I also stand by my claims about the ABC. 
Keen mentioned the salary of $100,000.00 and not me. And, he was NOT talking about the average wage, whatever that might be. Are you suggesting that the average wage has increased from 30K to 100K under this Howard Govt? If you are, then Howard will romp in the next election. 
You said, “You are also playing a small amount with the “take home pay” because you have not accounted for super, and other deductions (health fund, life insurance, and maybe an annuity) that a prudent worker would plan for, or be compelled to pay. If only tax was all that went………….” Actually I am not trying to play any games. We all know that personal income tax has fallen under the Howard Govt. 
For your information the employer, not the employee, contributes the 9% super paid into a workers fund. 
All the other expenses you list are normal living expenses, except Howard introduce the GST and removed wholesale sales tax. 
I repeat my claim that Keen is playing games with the facts. 
What Keen was trying to say is that we are more heavily in debt today than we were 17 years ago, and he is right. The reason we have borrowed more is because interest rates are lower and borrowed money is more attractive at 8.5% than at 17.5%. Borrowers today are paying off capital and not just interest. 
I also repeat that peoples disposable income is greater today than it was 17 years ago and once again offer the “toy shops” as proof. 
Geoffrey Kelley

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