Kerry Bartlett (Macquarie, Liberal Party) Share this | Hansard source

You have got to give members of the opposition full points for audacity. They come in and try to argue that black is white. Regardless of the facts, they continue to repeat the mantra and repeat the hypocrisy. Their theory obviously is that, if they repeat something often enough, someone somewhere will be convinced, and perhaps somehow they might even convince themselves. Let’s forget the spin, the rhetoric and the posturing. Let’s just look at the simple facts. These are the facts, whichever way you want to look at them. When this government came into office, interest rates were 10.5 per cent. Labor left us interest rates of 10.5 per cent. Even after today and even if today’s rates are passed on, they are now 8.3 per cent, a full 2.2 per cent lower than what Labor left us. If you look at it another way, they are lower now than at any time during Labor’s 13 years. At 8.3 per cent, they are still 0.45 per cent lower than at any time during Labor’s 13 years.

The promise that we would keep interest rates at record lows still stands. They are lower by nearly half a per cent than at any time in the 13 years that the last Labor government was in office. Or look at it another way: look at the average. Over this government’s 11½ years interest rates have averaged between 7½ per cent and 7¾ per cent compared with Labor’s average of 12.75 per cent—a full five percentage points on average above this government’s. Look at what they left compared to now, or look at the record low now compared to the lowest point at any time under 13 years of Labor or look at the average. The facts show very clearly that interest rates are still far lower than Labor was ever able to deliver. And look at the high under Labor. For 10 consecutive months homeowners in Australia under Labor suffered 17 per cent interest rates. For 20 months under Labor—over a year and a half—homeowners battled with interest rates of 16 per cent or more.

If you look at the context, it makes the comparison even clearer and even more stark. The coalition’s low interest rate regime has prevailed in a time of strong economic growth and strong employment growth. Usually it is one or the other. Usually what happens is that you have a context of low unemployment and strong growth and you will get high inflation and therefore upward pressure on interest rates. Conversely you will have high unemployment, slow growth and low inflation and therefore downward pressure on interest rates. It is usually one or the other. Labor managed the miraculous daily double, or yearly double or 13-year long double. In a regime of slow growth and high unemployment, Labor managed to have high inflation and high interest rates. How they managed that nobody knows, other then through their own gross incompetence. Compare that with the context in which we have had low interest rates under the coalition. We have had a climate of strong growth, of strong employment generation and of low unemployment but we still have low inflation and low interest rates. In fact, low inflation has averaged only 2.5 per cent compared to Labor’s 5.2 per cent. So, in a context of slow growth, Labor still managed high inflation and therefore high interest rates; in a context of strong growth, the coalition has managed low inflation and low interest rates.

Look at it in another context. Look at it in the context of real wage growth. The coalition has had real wage growth of 21 per cent over 11 years that has not fed substantially into inflationary pressures. What did we have under Labor? We had the accord, whose whole aim was to drive down wages—and it succeeded, under Labor. Real wages fell under Labor. Real wages fell under the so-called friend of the worker. Real wages fell under the so-called workers’ party by 1.8 per cent, and by driving down wages they could still not contain inflation. What a shambles that was. Yet under this government we have had rising real wages, strong jobs growth and still a low-inflation, low-interest-rate environment.

Look at the facts again. Inflation under this government for 11 years has averaged 2½ per cent; under Labor, over five per cent. Interest rates under this government average 7.75 per cent; under Labor, 12.75 per cent. And still, even after today’s interest rate rise, if it is passed on, the rate is still almost half a per cent lower than at any time under Labor.

We should turn to the causes here because the causes are important. There are two main causes of higher interest rates. The first is inflation. As I said, in a climate of strong growth, full employment, you often get inflationary pressures. You particularly get them when the labour market is close to capacity. If you have an inflexible industrial relations system, it is very difficult to avoid an outbreak of inflation. If you have a flexible, accommodating industrial relations system, you can have strong growth, full employment and a low-inflation policy.

This has been acknowledged by both the previous and the current Governor of the Reserve Bank. In August last year, the former Governor of the Reserve Bank, Ian Macfarlane, said:

Obviously, it makes the job of monetary policy [setting interest rates] easier, the more deregulated the labour market ...

And he went on to give the reason:

If you get pressure in one part of the economy - in the past—

that is, under Labor’s regime, which they want to return us to—

the fact that wages had risen there would be used as a persuasive argument for it to be carried right across the country, the comparative wage justice argument - it’s easier to have hot spots without the hot spots moving throughout the economy—

now with a flexible labour market. The current Governor of the Reserve Bank, Glenn Stevens, earlier this year said simply this:

... the fact that the system is—

now—

less centralised means that industry or regional pressures do not flow over 100 per cent to other areas. A more enterprise focused set of labour market arrangements is also conducive to better outcomes—

in terms of inflation and better outcomes as well in terms of interest rates. So a more flexible labour market keeps downward pressure on inflation and downward pressure on interest rates.

Yet what does Labor want to do? Labor wants to return us to that very same rigid, centralised industrial relations system which would spread wage rises, through pattern bargaining, into non-productive industries and would put upward pressure on inflation and therefore upward pressure on interest rates. That has been acknowledged by everyone.

Look again at what Glenn Stevens said in February this year. A return to a centralised system, he said, would do this:

... what would be the impact of removing or substantially lessening the degree of flexibility which, over quite a long time now, has come into the labour market? I do not think it is any secret that if, for some reason, labour markets became much more rigid—

for some reason, such as Labor being elected—

much more prone to very large wage increases, which were not related to productivity and which flowed across industries the way they did many years ago—

that is, when Labor was in office—

that that probably would constitute something of a problem for managing resource booms like we presently have.

So a return to Labor’s industrial relations system would clearly put upward pressure on cost inflation and therefore upward pressure on interest rates.

It is as clear as day that the contrast is there. An inflexible industrial relations system, which we had under Labor previously, which produced high inflation, which gave us high interest rates and which is the same system to which Labor wants to return Australia, would put upward pressure on interest rates. Conversely, the flexible industrial relations system this government has introduced and wants to maintain is keeping downward pressure on inflation and downward pressure on interest rates.

The second main pressure on interest rates, of course, is borrowing. We have already heard from the Treasurer—and we have seen what the state governments are doing. The state governments, by going into the money market and putting upward pressure on demand for funds, are putting upward pressure on interest rates. By contrast, this government, by being a net saver instead of a net borrower, is keeping downward pressure on interest rates. We have the state governments wanting to borrow $70 billion over the next five years—coincidentally, exactly the same amount that Labor borrowed in its last five years federally. Seventy billion dollars in five years by federal Labor; another $70 billion in the next five years by state Labor—what in the world would we have if Labor were re-elected, and what would the consequences be for interest rates? We know that Labor equals higher deficits. Higher deficits equal upward pressure on interest rates. So in terms of industrial relations policy, in terms of fiscal policy, Labor’s track record, the evidence of the states and what Labor wants to return us to will all put upward pressure on interest rates. The contrast could not be clearer. (Time expired)

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