The ghost of Robert Menzies has yet again been sent to haunt to the modern Liberal Party, this time by Canberra Times economics editor Peter Martin. The target is usually John Howard, but this time it is Peter Costello. In response to the Treasurer’s efforts this last week to heavy the banks into not raising interest rates, Martin writes:
John Howard’s hero, the founder of the Liberal Party and Australia’s longest serving Prime Minister, Sir Robert Menzies fought the Labor Party’s attempt to nationalise Australia’s private banks with every fibre of his being….
The man who would like to become the next leader of the Liberal Party, Australia’s Treasurer Peter Costello is acting as if Menzies had never won…
The fact is the banks can move their rates wherever they like (so long as they don’t collude). Menzies made sure of it.
Menzies as a friend of free capital markets? Hardly. Banks were subject to quantitative controls on lending, so interest rates were not all that relevant. Credit was effectively rationed, so banks could not compete on rates. You dressed up in a suit and went cap in hand to the bank manager and were thankful they thought you worthy of some of whatever they had to lend. Of course, now *they* put on the suit and come to your house.
The RBA has data on standard home loan rates back to 1959. They ranged between 5% and 5.5% for the entire 1960s.
R.A. Foster’s useful collection of historical economic statistics lists the maximum rates for housing loans (table 3.21b), starting in 1961 (Menzies was PM 1949 to 1966) and ending in 1985.
Menzies was certainly preferable to the Labor Party of his era. But across almost all areas of economic and social policy he was less liberal than the Howard government. The exception is total taxation and government spending. The ghost of the more-liberal-than-Howard Menzies, like all ghosts, comes from an over-active imagination, not reality.