Joe Hockey and emergency interest rates

When it was elected in September 2013, the Coalition inherited the RBA’s monetary policy settings that were framed around a 2.5 per cent official cash rate.

In all of the 486 days since the election, the cash rate has been set at 2.5 per cent and as 2015 kicks off, the futures market is pricing in a strong probability that rate will fall to 2.0 per cent within a year.

When, in August 2013, the RBA cut official interest rates to 2.5 per cent and Mr Hockey was Shadow Treasurer, he made the following points in an interview with Leigh Sales on the ABC’s 730 program about the RBA and its monetary policy settings:

“they’re not cutting interest rates because the economy is doing well. Interest rates are being cut to 50 year lows because the economy is struggling.”

“if your argument is that the lower the interest rates the better the economy, go and ask the British or the Americans or the Europeans that have interest rates at zero how their economies are going because I tell you what, we are now beyond emergency levels.”

“if anyone thinks that the Reserve Bank acted today because the economy is doing really well, and Labor’s doing a terrific job running the economy, they’d be deluding themselves.”

Let’s assume the futures market is correct and the cash rate is cut to 2.25 per cent within the next few months and then 2.0 per cent a little after that.

Will Mr Hockey say:

“they’re not cutting interest rates because the economy is doing well. Interest rates are being cut to 50 year lows because the economy is struggling.” [A 2.0 per cent cash rate in early 2016 would be a 55 year low.]

“if your argument is that the lower the interest rates the better the economy, go and ask the British or the Americans or the Europeans that have interest rates at zero how their economies are going because I tell you what, we are now beyond emergency levels.”

“if anyone thinks that the Reserve Bank acted today because the economy is doing really well, and the Coalition’s doing a terrific job running the economy, they’d be deluding themselves.”

Just wondering.