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Dollar's fall further bad sign for interest rates



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Leader o f the Opposition

NEWS RELEASE BY JOHN HOWARD MP L60/85

DOLLAR'S FALL FURTHER BAD SIGN FOR INTEREST RATES

The most recent fall in the Australian dollar will increase upward pressure on interest rates.

The dollar's fall is the third event in the past week which has worsened the interest rate outlook.

Last Friday's money supply figures offered no hope of any early reductions in interest rates.

The absence of any discounting for devaluation in yesterday's national wage decision sent the wrong signal to international investors in the Australian dollar.

The Australian dollar is now performing very badly. Despite falls in the US dollar our currency has continued to decline against the trade weighted index.

This reflects continuing concern abroad about our balance of payments and hence the strength of our currency.

Given tl>at the Hawke Government must support the dollar with high interest rates to avoid a further major devaluation, the interest rate outlook becomes bleaker each week.

Australia now has the highest real interest rates for mord than 50 years.

The pressure cooker effect is now at work in the housing interest rate area. The Government’s interest rate ceiling has perversely pushed poorer high risk borrowers into high interest rate borrowing.

The dwindling deposit base of savings banks inevitably means a rationing of funds for home lending from these traditional sources.

These developments have all occurred within less than 12 months of the Prime Minister and the Treasurer promising us that 1985 would be a year of falling interest rates.

CANBERRA 5 November 1985

Parliament House, Canberra, A.C.T. 2600 Phone 72 6994