Citizens Electoral Council of Australia

Media Release Wednesday, 4 February 2015

Craig Isherwood‚ National Secretary
PO Box 376‚ COBURG‚ VIC 3058
Phone: 1800 636 432
Email: cec@cecaust.com.au
Website: http://cec.cecaust.com.au

Interest rates at red alert level: This is not a drill!

Yesterday’s rate cut by the Reserve Bank is a screaming emergency siren alerting to a serious crisis in the Australian economy.

The authorities aren’t saying there is a crisis, the Liberals’ “debt and deficit disaster” propaganda aside. (Of course, the population is screaming that there is a crisis, every time they vote now, Queensland being the latest example—voters are punishing every first-term government that ideologically imposes policies which add to the economic pain in the community.)

But by slashing rates to 2.25 per cent, the RBA is signalling that the deep crisis in employment, production, and economic activity in Australia is spiralling out of its control.

The current 2.25 per cent is three-quarters of a per cent lower than the low of 3 per cent that interest rates reached during the 2008-09 global financial crisis, which then-Treasurer Wayne Swan called “emergency” levels.

It also means that the so-called “real” interest rate, which is the interest rate minus the official inflation rate, currently around 2.2-2.4 per cent, is effectively zero!

The RBA is sweating bullets. It hopes that slashing rates will stimulate exports, by pushing down the value of the Australian dollar; stimulate consumer spending, by freeing up disposable income; and—the big one—stimulate house buying, to keep the housing bubble propped up.

In the case of the housing bubble, the RBA knows that if the job losses in productive industries such as car manufacturing, smelting and refining lead to a sell-off or even slow-down in the housing market that pops the bubble, the banks will crash and take the rest of the economy with them.

Solution: Glass-Steagall and a national bank

The crisis the RBA is responding to is not an “Australian” crisis; it is the ongoing global financial crisis impacting Australia. The CEC has repeated many warnings of experts that a new, more devastating phase of the global crisis is looming, which could be set off by such threats as Europe’s debt crisis, the blow-out in $20 trillion of derivatives speculation on the price of oil, or any combination of those and other factors.

The Australian government must immediately act to protect the ongoing functionality of the financial system and economy by imposing a Glass-Steagall separation of retail banking from speculative investment banking. This separation will enable the government to protect the retail banking that services the real economy, so that only speculative investment banking is exposed to future crises. It will require breaking up the Big Four too-big-to-fail banks into separate retail and investment banks.

The government must also act to revive and revitalise Australia’s productive economy and industrial capacity, by establishing a national bank that can direct public credit into great nation-building infrastructure projects. Such projects will breathe new life into many productive industries, including steel and machinery manufacturing, and create hundreds of thousands of high-skilled, high-wage full-time jobs.

To fight for this solution, join the CEC.

Click here for a free copy of Glass Steagall Now! which elaborates the policies of Glass-Steagall and national banking.

Click here to join the CEC as a member.

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