Christine Milne (Tasmania, Australian Greens) Share this | Hansard source

I just want to follow up on the minister’s statements in relation to the mid-year economic forecast and the assumption about the exchange rates in the government’s decision to redirect $5.7 billion away from households and towards the polluters. The government is assuming that the current high exchange rate of around A$1 to US92c will continue into the future and thus lower the cost of the CPRS for households. Whilst you could assume that is consistent with normal budget process, assuming that the current exchange rate will continue into the future, on this basis the government is redirecting a total of $5.7 billion out to 2019-20.

My observation in recent years is that foreign exchange rates are volatile and notoriously difficult to predict. There are many reasons why your assumption that these exchange rates are going to continue as they are may in fact not be valid—for example, Australia’s current interest rates are higher than the rest of the world therefore encouraging financial capital inflow and raising the value of our dollar, but as the rest of the world recovers their interest rates could be expected to increase thus reducing demand for the Australian dollar. The demand for our mineral resources might be less than expected, reducing our exports and demand for the Australian dollar. As other currencies strengthen against the US dollar—for example, the euro—that will push up the US dollar permit price, and that is something that is beyond Australia’s control.

Therefore what I am asking you, Minister, is: does the government reasonably expect that in the long run interest rates will continue at their current levels? What happens if the Australian dollar and costs to households are higher than anticipated by the government’s agreement with the coalition? What are your contingencies for assisting households if this is the case since you have redirected $5.7 billion out to 2019-20 on the basis of exchange rates? From the way we are looking at it, the assumption that you have made to justify the transfer of money from households to business is that there will be stability in foreign exchange markets. I find that extremely difficult to defend as a contention, so I am really interested to know: what is the contingency if indeed interest rates do not continue at their current level and what happens if the Australian dollar falls and the cost to households is greater?