Craig Emerson (Rankin, Australian Labor Party) Share this | Hansard source

At the outset, I would like to acknowledge the contribution of the member for Cook as chair of the various hearings of the inquiry by the House of Representatives Standing Committee on Economics, Finance and Public Administration. In relation to the payments system he was able to elicit a lot of valuable information but, more importantly, to sift through that information with other colleagues on both sides of the parliament and come up with a report that I believe contains a reasonable level of insight.

Let me explain that observation. We were bombarded with arguments in relation to the payments system from both sides. I expressed then, and I reiterate now, my disappointment that so many of the witnesses who came to the inquiry spoke very much from the point of view of vested interest. There did seem to be a scarcity of independent analysis of the payments system and of the reforms of the payments system that had been implemented by the Reserve Bank.

It was proposed by some—indeed, many—that another authority should review the Reserve Bank’s reforms of the payments system because they felt that the Reserve Bank had not done a good job overall. The committee considered that it had done a reasonable job and that there was not a case for an independent review of that work.

To keep the whole matter in perspective, the estimate of the total available reduction in cost to consumers was $580 million, which works out at $29 per annum for every Australian, or 56c a week. So we were not talking about big beer for Australian consumers, but it was big beer for a number of the players in this arena. We were not convinced by arguments that none of that money was passed on to consumers, nor were we convinced that all of it was passed on to consumers. But, as the chairman has pointed out, it is likely in a competitive market that at least most of it would have been passed on to consumers.

The second part of my contribution today deals with the interviews that we conducted with the Governor of the Reserve Bank in February. They are to be resumed next Friday and I am sure that will be a fascinating meeting.

The report that we are debating today contains evidence from the governor given at the hearings on 17 February where he said:

... based on the considerations I have outlined here today, it is more likely that the next move in interest rates would be up rather than down.

That was indeed prophetic, because the next movement was up. That was in May. Subsequently there has been another movement—again, up—in August, and the financial markets are factoring in a 90-odd per cent probability of a further increase in interest rates within the next few months.

So, already we have had three interest rate rises since the last election when the Prime Minister had promised to keep interest rates at record lows, and a very high probability of a fourth. I put on the record today that there is a realistic possibility of a fifth interest rate rise since that commitment was given by the Prime Minister.

It is worth asking how we got to this point. A lot of evidence has been provided by the Reserve Bank, not only at those hearings but, more recently, in the statement on monetary policy. Acute skill shortages have been building up over a very long period of time. A 15-year economic expansion inevitably will result in domestic demand hitting up against capacity constraints. The government should have had a lot more foresight in seeing this coming.

I would argue that the basis of that 15-year expansion was firmly founded in the economic reform program initiated by the previous Labor government and carried forward in some places by the coalition. But this government should have anticipated that problem. It failed to do so and that is why the interest rate chickens are coming home to roost. Instead of building the nation, the government has built its electoral stocks by spending up big in election years with no plan for the country’s future. So it will be a fascinating hearing on Friday, when we will be talking to the governor at his last appearance. I again thank the chair of our committee for the work that he has done on the payments system and more generally.

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