Now, I know that some of you have no interest in sport so the fact that I’m using a sporting analogy may put you off, but if you just remember it’s an analogy and stick with it, you’ll soon see that it was an appropriate comparison. On the other hand, when I start talking about AFL football some of you won’t see past the fact that I’ve suggested that Port may lose a game some time in the near future and you’ll be sending off a complaint about my lack of understanding about their invincibility and that last week’s game was never in doubt even if it relied on a kick after the siren.
Anyway, when trying to tip future winners, all one can do is rely on past results even though past success is no guarantee of what’s going to happen this week. Given that Port have won several games in a row and West Coast have lost several games by huge margins, when Port eventually comes up against West Coast it seems reasonable to bet the house on Port. (No, I’m not encouraging gambling and the Sportsbet ad that pops up is just coincidence!)
Except that it’s never reasonable to bet the house on anything because the future is always uncertain. It’s only in retrospect that we can say: “Well, that was obvious, wasn’t it?” The difficulty of making predictions is that they’re about the future and one can never be sure. If Port did struggle to beat West Coast in a future game, we wouldn’t know if West Coast have made a stark improvement or whether Port have gone off the boil but the week after’s results may go some way to answering that question, but until the future happens, your guess is as good as the average economist on whether Phil Lowe will raise interest rates this afternoon.
So, just like footy tipsters examining the entrails of the previous games, economists look at economic data to predict the future and the past doesn’t tell us the future, it only gives us likely outcomes. When it comes to interest rates, we have economists trying to predict the likely outcome of the decision which is all about what the prognosticators at the Reserve Bank are predicting about the likely direction of inflation and how many interest rate rises they need to inflict on the poor people with mortgages and businesses with loans in order to stop them doing things like expanding their businesses, going to work, paying their bills, eating and living in a house.
Yes, I said that it’s wrong to bet the house on anything but I was overlooking the fact that it’s fine to bet the house when you’re Reserve Bank governor and it’s someone else’s house. Mr Lowe has made it clear that he wants to keep his job and it’s been made pretty clear that he feels the best way to do that is to ensure a hundred thousand or so lose theirs, taking the unemployment rate up to a more acceptable 4.5%.
Some economists are concerned that in spite of the interest rate rises, the economy remains stubbornly healthy. Some people are continuing to spend and, even though the most recent inflation figures suggest that it’s on the way down, there’s still concern that only some things are coming down. Wages, for example, are almost keeping up with inflation and this is a terrible thing because it enables people to spend. Nobody seems to be pointing out that some people will actually have more disposable income, owing to the great interest they’re receiving on their bank deposits or superannuation payments, but hey, they’re not the ones that interest rates are targeting because they’re the sort of people who might be economists.
Of course, everything that happens now is Labor’s fault. I’m not trying to suggest that Labor can get away with blaming world events outside their control or the previous government forever… That’s the prerogative of the Liberal Party… I heard Jane Hume on the radio yesterday and it was a fascinating interview. I don’t think I’ve ever heard anyone contradict themselves in the space of two questions quite as often. For example, the government should be doing more to help people with the rising cost of living, but it shouldn’t be spending anything to do it and, yes, we voted against the energy relief package, and yes, it may have brought inflation down by three quarters of a percent, but the problem is that it’s only temporary, and while giving people money might be inflationary the Stage 3 tax cuts are just fine because some of the cuts are to people on $60,000 and they need help and surely you wouldn’t want to hurt the struggling peasants…
Mind you, I am only loosely quoting here so Senator Hume may say that my interpretation is only loosely based on reality, which is appropriate given her description of the world isn’t even that.
Well whatever happens with interest rates this afternoon, I’m looking forward to Uncle Phil’s advice in the next few days where he suggests that if we’re struggling we can do something like spending less, taking on extra work or selling one of the children which both brings in extra revenue AND reduces expenditure. I’m surprised that he hasn’t suggested it already!
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