Tony is an economic illiterate.
Low 10-year bond rates are the deal of the century but Abbott's not at the table Who'd say no to the deal of a lifetime? Tony Abbott would, and it's our tragedy.
The 10-year bond rate is the rate at which the government can borrow for 10 years at a fixed rate of interest. Right now it's just 2.55 per cent, an all-time low.
It’s rare to be offered money for nothing. All we would need is confidence in the worth of our ideas.
By way of comparison in the 1970s it exceeded 10 per cent, in the 1980s it passed 16 per cent, in the 1990s it passed 10 per cent, in the 2000s 5 per cent, and until now in this decade it has usually been above 3 per cent. It dived below 3 per cent at the end of last year and is now just 2.55 per cent, the lowest in living memory.
If Australia was to borrow, big time, for important projects that took the best part of a decade to complete, it would have no risk of ever having to fork out more than 2.55 per cent a year in interest. The record low rate would be locked in for 10 years.
Australia's inflation rate is currently 2.3 per cent. Although it will almost certainly fall in the wake of the collapse in oil prices when it is updated next week, the Reserve Bank has a mandate to keep the rate centred at about 2.5 per cent. That means that right now our government is being offered billions for next to nothing, billions for scarcely more than the expected rate of inflation.
If Abbott was the chief executive of a company with good prospects he'd grab the money and borrow as many billions as he could without impairing his credit rating.
In Australia's case that's probably an extra $100 billion. That's enough to build the long-awaited Brisbane to Sydney to Melbourne high-speed rail line, or to build Labor's original national broadband network, or Sydney's $11 billion WestConnex road project plus Melbourne's $11 billion metro rail project plus Melbourne's $16 billion East West Link plus something big in each of the other states.
And it would cost next to nothing. All each of these projects would need is a positive real rate of return (which several of those listed above lack) and we would get ahead.
http://www.theage.com.au/comment/low-10year-bond-rates-are-the-deal-of-the-century-but-abbotts-not-at-the-table-20150120-12tq4j.html
