With the Labor government (thanks to Slipper, Thomson and Gillard herself) now almost surely to fall sooner rather than later, how do property investors need to review their game plan?
Rational investors, one would expect, hope for the lowest possible interest rates at all times, most obviously to maximise their own rate of return on investment. Consequently, rational investors generally want governments to deliver budget surpluses whenever possible, as surpluses are the best way to facilitate lower interest rates. (Of course, rational investors will tolerate temporary budget deficits in times of economic emergency provided the deficit spending prevents the economy entering into a recession.)
The question every rational investor needs to start asking now is, will an incoming Abbott government deliver budget surpluses, and hence allow the RBA to set the lowest possible interest rates, or not?
The signs quite frankly are not looking good, so far as I can see.
In contrast to the current Labor government’s declared determination to deliver a budget surplus in 2012-13, about all we really know of the Abbott economic plan is his intention to boost government spending - specifically with more voter-buying, middle class welfare handouts. You all know the sort of thing proposed here: Removal of means testing for government assistance to family benefits of every sort; massive government-sponsored expansion of maternity leave; government-funded increases to super without any mining tax revenue, etc, etc. Reportedly, all these spending promises have key people in the Liberal party room – Robb, Hockey, Turnbull and no doubt many others – seriously disconcerted, explaining Hockey’s recent high-profile intervention from London.
So as rational investors, what do you all think will happen to interest rates under an Abbott government, and most importantly, why?
Rational investors, one would expect, hope for the lowest possible interest rates at all times, most obviously to maximise their own rate of return on investment. Consequently, rational investors generally want governments to deliver budget surpluses whenever possible, as surpluses are the best way to facilitate lower interest rates. (Of course, rational investors will tolerate temporary budget deficits in times of economic emergency provided the deficit spending prevents the economy entering into a recession.)
The question every rational investor needs to start asking now is, will an incoming Abbott government deliver budget surpluses, and hence allow the RBA to set the lowest possible interest rates, or not?
The signs quite frankly are not looking good, so far as I can see.
In contrast to the current Labor government’s declared determination to deliver a budget surplus in 2012-13, about all we really know of the Abbott economic plan is his intention to boost government spending - specifically with more voter-buying, middle class welfare handouts. You all know the sort of thing proposed here: Removal of means testing for government assistance to family benefits of every sort; massive government-sponsored expansion of maternity leave; government-funded increases to super without any mining tax revenue, etc, etc. Reportedly, all these spending promises have key people in the Liberal party room – Robb, Hockey, Turnbull and no doubt many others – seriously disconcerted, explaining Hockey’s recent high-profile intervention from London.
So as rational investors, what do you all think will happen to interest rates under an Abbott government, and most importantly, why?
