House debates

Thursday, 21 October 2010

Questions without Notice

Interest Rates

2:42 pm

Photo of Joe HockeyJoe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | | Hansard source

My question is to the Treasurer. I refer the Treasurer to his words of warning to the banks earlier this year that ‘they would incur the wrath not just of the Australian people but of the Australian government’ if they increased interest rates beyond the Reserve Bank moves. Why should the Australian people take the Treasurer at his word when he now suggests that there is nothing he can do about the behaviour of the banks on interest rates?

Photo of Wayne SwanWayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | | Hansard source

Well, that is not what I have said, and I have made it very clear. I have made a number of things very clear and I will just very clearly go through them. I have made it very clear that there is no justification on the part of any of the major banks in the current circumstances to go for an out of cycle rate rise, should the Reserve Bank at some future stage take a decision to put up the cash rate. Of course, those over there like to go around pretending that somehow the Reserve Bank is not independent. The Reserve Bank is independent and it will take its decisions separately from the government.

What we have done, because we have been concerned about competition in the banking sector, is a couple of very significant things. The first thing that we have done is make a very significant investment in AAA rated residential mortgage backed securities. Why is that important? It is very important because one of the unfortunate consequences of the global financial crisis and the global recession, which those opposite do not think ever happened, was further concentration in our banking sector. That was an unfortunate consequence of the global financial crisis. Of course, when we were dealing with that those opposite were in here opposing the bank guarantee, something that was absolutely fundamental, particularly to the viability and the standing of our smaller lenders. It was absolutely critical to seeing the flow of credit through credit unions and other smaller lenders during the global financial crisis, and they came into this House and opposed us every inch of the way.

The member for Wentworth led that charge, and he did it with Godwin Grech. We have got the whole history of their connivance against the bank guarantee revealed to us by Godwin Grech and his relationship with the member for Wentworth. We have put in place additional measures to ensure there is more competition in the sector because of the global financial crisis. Therefore, our investment in residential mortgage backed securities is critical.