Asleep at the wheel: the real interest rate experience in Australia

Mark McGovern
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Mark McGovern: School of Economics and Finance, Queensland University of Technology, 2 George Street, GPO Box 2434, Brisbane QLD 4001, Australia

Economic Analysis and Policy, 2010, vol. 40, issue 3, 283-296

Abstract: Real interest rates have been unsustainably high in Australia for a generation, yet it seems no one has noticed. A most important change has gone unmonitored. Historically high real interest rate, examined here in terms of the variable housing loan rate, now exceed increases in the returns from production and complicate remediation of pervasive problems. Significant external problems have arisen as the nation has expended more than it produced, and borrowed to service the gap. Issues raised in this paper deserve critical attention, and new policies. Constructive dialogues and new thinking are needed if Australia is to successfully move beyond current debts and difficulties.

Date: 2010
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