Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

As I have repeatedly said in this place, the undertaking we took to the last election was that we would ensure that interest rates remained lower under us than they would under the Labor Party. That is our undertaking. That is our commitment, and that is what we will say to the people at this federal election. As I have said before on numerous occasions, the evidence stands to support our assertion that interest rates are lower under the coalition than they are under Labor.

We have the latest evidence that the implications for interest rates in this country of the election of a Rudd-Swan government that would wind back nearly 15 years of industrial relations reform to the bad old days pre Keating would be an increase in interest rates of at least 1.4 percentage points. So we do know that interest rates would be higher under a Labor government than under a coalition government. We believe that the Australian people understand that.

With respect to Senator Sherry’s question as to Mr Norris’s remarks, it is a fact that there is financial volatility in the wider world, particularly caused by the concerns and the fallout from the subprime mortgage market difficulties in the United States. Mr Norris was making the fair point that in the globalised economy that we have, which generally works to people’s benefit, there can be financial contagion—financial flow-ons—even to countries as strong as Australia. As the Prime Minister said in his press conference today, the reassuring aspect for Australia is that we do now have a very strong, resilient and flexible economy. We have paid off all our debt; we have the budget in surplus; we have real wages rising; and we have relatively low inflation and relatively low interest rates. So we could not possibly be in a better position, in our submission, to withstand any flow-on effects from the instability in world financial markets caused by the subprime mortgage market in the United States. Mr Norris was really saying that there will be a reappraisal of risk and a reappraisal of the price of credit.

We want to make sure that all our levers are set, as I said before, at low inflation. That emphasises the importance of maintaining flexible labour markets. It emphasises the importance of keeping the budget with strong surpluses. We have said that our target and our operating principle are to keep the budget at about one per cent surplus. That is why we are concerned about the extent of fiscal laxity at the state government level: it is placing undue demand on the economy, which will put pressure on inflation and, therefore, on interest rates. There are reasons for concern, and that is why, as the Prime Minister said, it is more important than ever at a time like this to ensure that you have experienced, strong, capable hands at the wheel of the national economy. And I submit to you, Mr President, that that is what Australia has, with Mr Howard as Prime Minister and Mr Costello as Treasurer.