It should come as no surprise that the Reserve Bank of Australia (RBA) announced today that it has raised the cash rate to 0.35%, up from 0.1%pa. This rate rise is expected to be the first of many by the RBA in an attempt to contain inflation which dramatically increased to 5.1% per annum in the March quarter.

The interest rate decision by the RBA today got me thinking about Clive Palmer’s election pledge to cap home loan rates at 3% for 5 years which I consider utterly irresponsible, but likely to appeal to some gullible voters.

A bold promise to keep mortgage rates at record low levels is simply too good to be true, especially when it is well known that the Federal Government has no power to set interest rates, a role managed independently by the RBA.

Although it is conceivable that an elected Palmer Government could legislate for power to set interest rates (unlikely to be successful) or even pursue aggressive fiscal policies to influence (manipulate) rates down, both would be counterintuitive as financial markets will be in a state of chaos while exponential money supply growth would drive inflation even higher.

Disinformation, like what we are seeing on interest rates in the Federal election has a direct impact on the lives of innocent people. At Convergence Wealth, we consider educating our clients as one of our key roles and we take this responsibility very seriously. It is only when we are fully informed that we can make smart financial decisions and plan for the future.

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