This comment was made at Macrobusiness (link may be locked – but there is a free trial available)
Joe Hockey is either having a lend or is as ignorant as he seems when he makes statements to the effect that he is genuinely concerned about Australia being “subservient” to overseas bankers.
Being subservient to overseas bankers has been core LNP policy since the Howard era when those overseas bankers became the source of the interest rates that will “always be lower” under a LNP government.
Of course the ALP joined in the shameless “subservience to off shore bankers for lower interest rates” trade but trying to wean an economy off a powerful drug like debt addiction is not for the faint hearted or focus group driven pollie of the modern era.
The first step in restoring Australian competitiveness and making a start on the debt addiction is to restrict access to the drug.
Regulating the most unproductive and infectious capital inflow transactions (yep those hundred billion dollar transactions relating to residential mortgages and govt bonds) is the ONLY option.
1. The $AUS will immediately start to head towards a rate that reflects our woeful trade performance (during a mining boom no less) – i.e lower.
2. The dependence on foreign bankers will start to reduce.
Yes, that will mean there will be upward pressure on interest rates as the weaning process continues and that will mean the Debt Machine will putter but the solution to that is simple and will be unavoidable in due course in any event.
Support the process with government deficits that are not reliant on debt.
How? Sell, as required, interest free non transferable bonds to the RBA who can then magic up the required accounting entries for the Treasury ES account. The AOFM can take early retirement.
It would be nice if for once the debate went a little further than how we might fix the economy (the broken Household Debt Machine model) without fixing the economy (replacing the Household Debt Machine model with a new one).
All in good time I guess.