Australia is pushing for a budget surplus this year which would allow the Reserve Bank of Australia the chance to cut interest rates says Prime Minister Julia Gillard on Thursday. The central bank has already hinted to a possible cut at its next meeting on May 1st. The only concern is the possibility of inflation creeping back.
The central bank will have a better idea about the possibility of a rate cut when key inflation reports come out next week. If inflation appears to be contained you can very well expect a rate cut.
Prime Minister Julia Gillard has been pushing for a rate cut saying that the budget surplus is not part of a political agenda as much as it is an opportunity for lower rates which is good for Australian citizens because their interest payments will be much lower.
In return, the Labor government will be proposing a strict budget on May 8th. If they are able to get a surplus, they will be one of the first among developed countries and regions.
Currently, Australia’s rates are at 4.25% which is above the 6.75% when the Labour party took over control of the government in 2007. Although the rate levels are much higher than the US and Europe, whose rates are essentially zero, the Australians are able to return to a surplus and a well run economy. Ultimately, Australian citizens will be able to live more prosperously because their government is able to put aside their political agendas for the greater good of the citizens. One of the main reason for the Australian dollar’sCurrencyShares Australian Dollar Trust (NYSE:FXA) strength is due to the high interest rates investors receive.
Europe and the US could learn a thing or two from the Australians. Unfortunately the West has developed a new system of governance: spend a lot of money and being concerned about politics more than their citizens they are supposed to be representing. The role of government should be to protect the citizens and not constantly be fighting about the issues because then nothing gets accomplished and we are still in the same mess.
Instead of spending and borrowing every dollar we can get our hands on, the US government should be trying to cut the deficit and getting our spending addiction out of control. I’ve said it once and I will say it again: the greatest threat to the United States and Europe is our debt levels, not terrorism. Bottom line, the US and Europe need to start taking a page out of Australia’s book and focusing on the prosperity of the citizens, not for spending and political gridlock.