Brendan Nelson (Bradfield, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister. Prime Minister, why are interest rates coming down when inflation is going up?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

The Reserve Bank sets interest rates, and one of the things it sets interest rates on the basis of is the state of overall inflationary pressures in the economy. One of the things that the Reserve Bank is entirely mindful of is the extent to which those inflationary pressures have endured over time. If you look carefully at the minutes of the most recent Reserve Bank meeting, it has concluded that these inflationary pressures have continued for some time. Furthermore, it has noted, as I believe has the IMF recently, that there has also been a moderating influence brought to bear on fiscal policy through the right settings which have been adopted by the government through its management of the budget.

Opposition Members:

Opposition members interjecting—

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

For those who scoff opposite, I would draw their attention to the most recent statement to this effect by the International Monetary Fund. If you are able to bring your fiscal policy into balance with your monetary policy, and to ensure that you have got the right settings overall, you make the job of the Reserve Bank easier to bring down interest rates over time. That has been one of the core organising principles which we have sought to bring to bear in the debate on the economy.

As I said at the beginning of my remarks, the key thing is that it is the Reserve Bank which sets rates. I note with interest, on that score, that the Leader of the Opposition had something to say to this effect this morning. He was disputing the proposition that the independence of the bank should be respected. In fact, the Leader of the Opposition began speaking about a particular requirement of the bank to bring in a 50 basis point decrease. A journalist said to the Leader of the Opposition: ‘You have made a case for 50. If you are Prime Minister, does that give you carte blanche to tell the Reserve Bank what you expect in terms of rate movements—cuts or increases in the future?’ Mr Nelson replied, ‘Well, the responsibility of the Prime Minister and the government of the day is obviously to make sure that we get the economic settings right, to talk up the Australian economy, not to talk the economy down, to speak responsibly about the inflationary challenge that we face.’ All fine and dandy. We go on. Journalist: ‘Would you like to see the Prime Minister say what you have said?’ That is calling on the bank for a 50 basis point decrease. Mr Nelson: ‘No, I’m not going to comment on that at all.’ Journalist: ‘But you’re the alternative Prime Minister as well. If Prime Minister, does that mean that you will tell the Reserve Bank what you expect in terms of rate movements?’ Answer: ‘No.’ So what we have is the Leader of the Opposition going out on the doors this morning, saying to the Reserve Bank that there should be a defined decrease of a particular quantum in the cash rate, while we on this side of the House respect the independence of the Reserve Bank. But then he is asked the key question: ‘You’ve said that as Leader of the Opposition. If you’re elected as Prime Minister, are you going to say that as well?’ He says no.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

It’s a different job.

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

The interjection says it is a different job. I hear constantly the Leader of the Opposition stand at the dispatch box and say he speaks as the alternative Prime Minister of Australia, and therefore his pronunciations on monetary policy are those of the alternative Prime Minister—that is, that the Reserve Bank should act in a particular way. What we now have is the new Nelson doctrine: what I say in opposition has nothing whatsoever to do with what I do in government. In other words, the overall dictum of those opposite is to say anything, to do anything, to promise anything in order to get themselves a headline. How can the Leader of the Opposition stand credibly in the parliament today and speak about responsible economic management when he goes out one morning and says, as Leader of the Liberal Party and as alternative Prime Minister, that the Reserve Bank should take a particular course of action on rates and, in the same breath, say that if he were Prime Minister he would not say that or do that? That is where we have got to with the Leader of the Opposition. The credibility of the Leader of the Opposition on this entire debate on interest rates—quite apart from how we have got to this position in the first place, given that we have had 10 interest rate rises in a row under the Liberal Party—collapsed on the doors this morning when he said, ‘I, Brendan Nelson, will be opportunistic and say what I like on this, but I, Brendan Nelson, as alternative Prime Minister, would not do this.’ The Leader of the Opposition does not know whether he is coming or going.