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| *Ostroff, Fair and Company>>>Australia Taxes |
Did the recent tax cuts in Australia help cause the interest rate rise? |
Did the recent tax cuts in Australia help cause the interest rate rise? No they didnt cause the rate rise but were perhaps a small factor in the decision. Before the Federal Budget in May (when tax cuts were announced), the Reserve Bank governor Ian Macfarlane said that tax cuts were affordable. However since the tax cuts came in and interest rates have risen Macfarlane has suggested that the tax cuts were too high, and that they may be a factor when considering future interest rate movements (if it results in increased spending and inflation). The bottom line for many people, especially those with a big mortgage, is that the interest rate rise (combined with high petrol prices) more than cancelled out the tax cut. From an economic point of view, there are many factors to take into account when considering interest rate changes - after all it is a prime instrument of monetary policy, one of the government's ways of regulating / dealing with the economy. The other means is fiscal policy, which happens to involve taxation. So in a nutshell - they're related, yes, but not as directly as one might think. See here for some more economics info; http://answers.yahoo.com/question/index?... |
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