No, he never said interests rates wouldn’t rise read the transcripts. He was always, always very careful with his words. But he came ever so close.
‘The Howard Government plan: keep interest rates at record lows.’
Liberal Party election campaign advertisement
‘We’re offering a continuation of the low interest rates of the last eight and a half years.’
John Howard, doorstop interview, Sydney, 4 September, 2004
John Howard knows elections are won and lost on impressions. Modern political campaigns are subliminal. They are a moving, flickering media blitz of ideas, positions and political assaults: tap into fears, offer security, appeal to the dreams and aspirations of suburban ordinariness. Some are much better at it than others.
Bob Hawke and Paul Keating were good in their day. The 1993 campaign against John Hewson and the GST was a copybook example. Keating lost it all, of course, when he went high culture. The battlers understand Cold Chisel but they’re not so big on Gustav Mahler.
John Howard knows this. That’s why we heard it: the word ‘sorry.’ For this PM, it’s a word dripping with political significance, and not one to be uttered lightly. It came in response to yet another interest rate rise, which chipped away another big chunk of the pillar of the 2004 election victory, and it guarantees that interest rates will no longer be the potent political weapon they once were.
Life in aspirational voter-land has changed considerably in just two years. Interest rates are up of course, house prices are down and then there’s petrol. By the time we go to the polls next year the landscape could be even bleaker for the heavily geared Howard battlers.
The economic squeeze in the suburban commuter belt is very real and becoming worse. That’s why petrol is spooking backbenchers in marginal seats and that’s why John Howard rates it as potentially his biggest political problem.
The PM is telling everyone he can that 2007 will be a difficult election to win and of course it will but privately he’s said to be pretty confident he can beat Kim Beazley for a third time.
Things may be getting tough and the economy may not be the political asset for this Government that it once was, but even though the Labor leader has started to talk tough, there is still a big gap between the rhetoric and reality. John Howard’s inner confidence is still succoured by Australia’s collective memory of 17 per cent interest rates under Keating’s Labor Government.
The most recent rate rise is an opportunity for Labor but it’s a real test too. The 2004 defeat came in large part because of a failure to adequately fend off the Government’s interest rate arguments. Labor knows the greatest challenge they have is one of economic credibility. ‘We need to be able to demonstrate to the Australian people that we can manage the economy,’ Kim Beazley said again just a few days before the Reserve Bank jacked up everyone’s mortgage repayments.
To win in 2007, Labor has to confront the interest rate bogey.
They don’t listen to Paul Keating much in Labor circles these days, but the architect of this political millstone has some pretty sound advice. Call him elitist, call him out of touch, but you could never label him reticent or lacking in self-belief. Here’s Keating on the 7:30 Report in May one of his rare television interviews:
Kerry O’Brien : How does Kim Beazley shake the high interest rate voodoo, at the next election, that John Howard used so effectively at the last one?
Paul Keating : First of all you take him on. John Howard had the highest interest rates in Australian history 21 per cent bank rates in 1982. What did he leave? He gave us a huge recession and 11 per cent inflation. We had interest rates peaking at 18 per cent, but we came out of it with 1 per cent inflation. I mean, we had stagflation under Howard we had stagnant growth and inflation.
Seventeen is a big number. The very idea that interest rates might get that high again is a suburban nightmare, but the fact is that the latest 0.25 per cent is an even bigger hit on the family budget than the dark days of Keating’s recession.
Here’s Craig James at Commsec:
In June 1989 when mortgage rates hit 17 per cent, repayments on the average $66,700 new home loan stood at $959 [a month]or 25.8 per cent of household disposable income. As a result of today’s interest rate decision, the variable housing rate is likely to rise to 7.8 per cent, translating to repayments of just over $1,685 a month on the current $222,200 average new home loan or 28.2 per cent of household disposable income.
Thanks to Fiona Katauskas.
And don’t forget that out there in the marginal electorates there are plenty of voters with mortgages way bigger than that.
So if Labor can’t put the past behind them now, they never will. There can be no more rolling into a ball and skulking off into a corner whenever 17 per cent is mentioned. Kim Beazley does finally seem to have recognised that. He’s called for a special Mini-Budget to address economic reform. Sure, it’s a stunt, but he wouldn’t be the first politician to pull one. It’s all about perceptions and impressions, after all.
There’ll be plenty of counter-attacks too over the next 12 months. The Government’s backbenchers have put their faith in John Howard. He’s still the master campaigner and their best chance of winning a fifth term.
But 2007 will be a real contest. Interest rates, industrial relations and petrol (unless it comes down significantly), will give Labor the best chance they’ve had since 1998.
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