..but not for anything he really should be sorry about.
image: Ron Tandberg for The Age
Prime Minister John Howard says he is sorry about the interest rate rise.
Official interest rates rose to their highest level in 10 years yesterday to 6.5 per cent.
Mr Howard has told Macquarie Radio he has taken a hammering about the Reserve Bank decision this morning.
“Sure, we’ve had an interest rate rise and I’m sorry about that – I regret it,” he said.
“I didn’t want an interest rate rise. But one has come about because the Reserve Bank, in its independent judgement, has made the call that the economy is so strong the best thing in the long-term interest of the economy is to adjust interest rates.”
What Johnny should really be sorry about, at least in his economic house-of-cards policies, is not pressing banks to have responsible lending policies- and for the First Home Owner Grant Scheme (FHOGS), which allowed a lot of people to buy homes who could not really afford to do so. The banks will write loans which push people’s disposable income levels below the poverty line and which will consume more than 50% of a person’s pay packet.
Folks on the razor’s edge of being able to make house payments will be bitten again- for the 5th consecutive time since the 2004 election- with the 6th consecutive rise tipped for January. No wonder mortgagee auctions and bankruptcies are becoming more commonplace.
The banks have been able to justify writing loans to people living on the edge of financial ability because of the boom in real-estate prices. The reasoning being that the bank can always seize and sell the asset, for more than the amount financed.
However, the price boom is totally busted. My housemate had been studying the market conditions for the last 3 years before buying a house last November. We knew back in 2001, when FHOGS was implemented, that considering the average mortgage in Sydney is $550,000, just a few, even fractional percent interest rate rises would force some people to sell- at bargain prices. This house sold for fully 20% off the asking price, mainly because of the trend of rising interest rates. The house next door sold 2 months ago also at about a 20% discount from the ask. The housing markets are definitely levelling off- and many Sydney suburbs are even seeing falling property prices, with some people now owning mortgages worth significantly more than the house.
It was Liberal Party policies which overheated the housing market with artificial stimuli- and now everyone’s paying the price. It’ll be about $50/month more for this household, in the near term.
Howard’s got a lot of cheek trying to blame Labor state governments for their long-term infrastructure borrowing as the cause of the rates hike. Pick a different fight with the states, Johnno- you won’t win this one.
If government unemployment figures were really accurate (you’re “employed” if you’re working 1 hour per week), Howard’s economic house of cards would become much more obvious. Couple that with the high possibility of a recession when the housing market hits the skids and all the brickies and chippies run out of things to do.
Thanks, Johnno- sorta. If it wasn’t for the bad Liberal policies, this house would have cost a lot more- but no thanks to you, paying for it just got a good bit more expensive.
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