Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

In a little over 12 hours from now, the Reserve Bank is set to announce its decision on interest rates. Tomorrow’s interest rate announcement is probably the most keenly awaited announcement in many years. Of course, it is not just mortgage holders, those with personal or credit card debt and business owners who are awaiting this decision—tomorrow, those most keenly anticipating the Reserve Bank decision will be members of the Howard government. I raise the issue of tomorrow’s interest rate decision not in the light of the obvious impact on family budgets of constituents in the electorate of Werriwa and elsewhere but in the context of the most recent interest rate falsehood that has been perpetuated by this government and by members of this government.

In the last few weeks, and particularly in the last few days, the Prime Minister has attempted to blame state governments for interest rates. In the words that the Assistant Treasurer used earlier today, ‘This myth is nothing short of a load of’—I will not finish that quote, Mr Speaker, but I think you have the gist of what I was about to say. The suggestion that state government borrowings over the next four years will have any discernible impact on interest rates of today or tomorrow is simply laughable. While it might fit the Crosby Textor election campaign manual, we know it does not fit with reality. As the ANZ Chief Economist, Saul Eslake, said:

There is very little direct linkage between borrowings by governments and interest rates.

Let us take a look at the facts. The combined deficits of state governments are less than one per cent of GDP. While the Prime Minister may have missed it, the Hawke and Keating governments deregulated the finance sector, expanding considerably the pool of available funds from which Australians could borrow. Accordingly, the suggestion that a borrowing requirement of less than one per cent of GDP will have an impact on the trillions of dollars available through the global capital markets is unbelievable. As Steven Keen from the University of Western Sydney said:

It’s like saying that somebody dropped a pebble in the ocean and that caused a tsunami.

Another fact is that the Commonwealth budget surplus for 2005-06 was 1.5 per cent of GDP and in 2007-08 it is projected to be 0.9 per cent of GDP. This change in budgetary position results in a 0.6 per cent stimulus, which is broadly equivalent to the stimulus provided by the states over the same period.

The biggest risk to future interest rates is the profligate spending of this government in the lead-up to the election. To date the coalition has committed to $7.5 billion in pre-election spending promises, and the spending promises will continue to increase right through to polling day. If interest rates rise tomorrow, the Howard government must accept responsibility for that rise. The Prime Minister cannot lay claim to low interest rates without taking responsibility for rising interest rates.

Despite the fact that the Howard government is responsible for upward pressure on interest rates and for squandering the benefits of the resources boom, the Prime Minister continues to try to dupe Australians with aggregate economic figures as he sticks to the claim that working Australians have never been better off. Well, working Australians in south-west Sydney have a message for the Prime Minister: he has never been so wrong. It is an insult to the intelligence of the Australian public for this government to think that people are willing to reward the government for good economic news and to simultaneously believe that it should be devoid of any responsibility for the bad economic news. Australians know that this is the desperate behaviour of a desperate government led by a desperate Prime Minister. The editorial in today’s Canberra Times summarised the issue most succinctly:

... the biggest threat to underlying inflation is the Howard Government itself. In its increasingly desperate attempt to rein in the Opposition, it has resorted to pork-barrelling of the most egregious kind. On this evidence, the Coalition’s mantra that it is a responsible economic manager is sounding very hollow.

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