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

When we look at the challenges faced by working families right across the nation, these families are being impacted by developments in the global economy and in the national economy. Across the global economy, the rolling impact of the subprime crisis means that we have had an increase in the cost of credit arising from the increased cost of lending, particularly between financial institutions. The US Federal Reserve recently sought again to act on this matter in its decision the other night to reduce its rates by 75 basis points. The Fed having reduced its benchmark interest rate for the sixth time since August, rates have fallen from 5.25 per cent to 2.25 per cent in that time. This is of direct consequence to every family in the country. The sheer size of the American economy and the impact of American actions on global financial markets means that the wash-through effect in terms of the private credit markets and the cost of home mortgages is going to be felt across the world. That is why we have an active interest in this parliament—as has the government—in monitoring very closely all actions being taken by the United States regulatory authorities, their monetary authorities, in their response to the ongoing impact of the subprime crisis.

The inflation challenge that we face in this country compounds the difficulties which our own regulatory authorities face. For the benefit of the House, I repeat: when the government was elected, interest rates in this country were the second highest in the developed world, courtesy of the previous government; and, secondly, we had inflation running at a 16-year high. This compounds enormously the task of those charged with the responsibility of economic and public financial management in this country. High inflation complicates the task of economic policy, particularly at a time of global economic uncertainty. That is why it is important that we embark upon a responsible course of action to deal with these challenges, to ensure that we have a budget balance and a budget surplus—hence the target that we have announced—to ensure elsewhere on the demand side of the economy that we are boosting private savings and also to pick up the slack left by those who have preceded us by investing in the supply side of the economy when it comes to skills and infrastructure. Of course, where the rubber hits the road with these global economic developments and the uncertainty of global financial markets, as well as the domestic inflation challenge, we have this real problem on our hands—namely, housing affordability for working families. The Age newspaper today reveals that, for the first time since records began in the early 1980s, rental vacancy rates are at a new record low of 0.9 per cent in Melbourne.

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