Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Hansard source

I am very pleased to speak on this matter of public importance, because the consequences of the government’s reckless spending are quite straightforward for people who are trying to pay off a home: higher interest rates. There is a very simple question that the government has to answer: do they want to spend more or do they want to keep interest rates low? That is the very simple question that they have before them. They can continue their record spending in today’s economic conditions and put further pressure on interest rates or they can stop their reckless spending, wind it back, get it back to manageable levels and take the pressure off interest rates. They can have one but they cannot have both; they can keep spending money in the way that they are or they can have lower interest rates. This is something that the government seem to struggle to understand in framing their economic policy.

Over the last 12 months the government have completely undervalued the impact of lower interest rates. If you listen to the government, the sun only gets up every morning when the Prime Minister commands it to do so, the only reason that we have an economy of any strength in this place is because of him and history started on 23 November 2007. But the Australian people are awake to this. The Australian people understand that when we entered this crisis the Australian economy was the strongest that it had ever been because of several decades of strong economic management but in particular 13 years of very strong economic management under the Howard government. This record of management has contributed to us being in the position that we are in today. The reason that we have a lower level of debt is because we entered the crisis with no debt.

The government have worked to put debt back on the Australian public’s finance sheet. They have totally underestimated the strength of our economy, which was given great support by having lower interest rates. They would have you think that everything that happened was a result of the money that they spent and that it had nothing to do with what happened in China and nothing to do with what was going on with our export sector—nothing to do with any of these factors. In fact, it all had to do with the money that they gave away. But the truth is that lower interest rates have had an incredibly important role to play over the last 12 months in which we have had an easing policy on interest rates and a reduction in interest rates.

Labor have decided that they would prefer the ongoing support for the Australian economy to exist in the form of them spending more money, and spending more money for a very simple purpose: to promote themselves. That is what you see with the hard hats and the luminous vests; that is what you see if you go to their campaign website, which is actually paid for by the taxpayer. If you go there you will see all these little google icons and all those sorts of things. That is what they want to spend money on.

The reason why the government will not draw back on their spending to take the pressure off interest rates is that they want to keep spending money. They want to keep spending money because they want to keep promoting themselves by using taxpayer money all the way from now until the next election and, I add, beyond. They want to spend beyond then because there is a New South Wales state election in March of 2011 and they want to make sure those signs stay up well until that time so that they can help out their state Labor mates.

So Labor have opted for higher spending to promote themselves rather than contracting that spending, getting that spending under control and taking the pressure off interest rates. The government have sought to justify their decision in several ways. Rather than telling us the truth, which is, ‘We just want to keep spending more money because that’s what we like doing, because we like promoting ourselves,’ they have sought to justify it by saying a couple of things. The first thing they have said is that the stimulus has peaked. They are saying the stimulus has peaked and they are arguing that the contribution of their stimulus spending to GDP has peaked, but it is a tricky statistic. And we are used to tricky statistics from this government when it comes to explaining what is happening in the economy. The Treasurer may argue that case, with the figures that have been provided to him from Treasury, but the figure he will not talk about is how much more money he is going to spend.

There is a difference between the relative contribution of a stimulus to economic growth and how much money, in absolute terms, you are still going to spend. And this money is still going to be spent. It is going to be spent over many more years—out to 2011, 2012 and 2013. Even though money may have been paid off to the states at this point, I know that in my own shadow portfolio of housing the money still has not hit the ground. So when this money is actually finally spent—and the bulk of it is yet to be spent; it is yet to hit the ground—that is when we will see this further stimulus hitting the economy although our economy is already performing, as so many have said, in a manner which is far stronger than the government ever anticipated when they first put these measures in place. So the government’s argument that the stimulus has peaked is absolute rot. It is total spin and it is designed to dissuade the Australian people from thinking that there is so much more money to be spent. ‘It’s all winding down,’ the Treasurer is saying, ‘according to the schedules and the timetables.’ That is simply not true.

The second issue they have spoken about, in justifying their position of spending too much money and forcing interest rates up, is that interest rates are already too low. They say that rates in Australia are already at record lows and that they are very, very low. Interest rates are low by Australian standards. The government know that interest rates are low by Australian standards. The opposition also know that it is true by Australian standards, but what the government fail to acknowledge is that interest rates for Australia compared to interest rates around the world are still high. Only four countries in the OECD have higher interest rates, on a cash rate, than Australia: Poland, Mexico, Iceland and Turkey. This is the club that this government aspires to put us in—to see our interest rates rise to the levels in those countries.

The other thing that has happened with our interest rates is that the government have moved first. They have moved before everybody. It was the New Zealand government that just recently decided—unlike our Reserve Bank—to keep interest rates where they were. Why did they decide to do that? The statement of the Reserve Bank of New Zealand was:

As we have said previously, the forecast recovery in economic activity is based on monetary policy continuing to provide substantial support to the economy. We expect such support will be needed for some time. As a result, we continue to expect to keep the OCR at or below the current level through until the latter part of 2010.

Why can the New Zealand Reserve Bank do that? They can do that because their stimulus was not as big and they are not spending money like this government. So New Zealand have given their Reserve Bank the option of keeping interest rates where they are. This government have decided not to do that. They have decided to keep spending money, which takes that option away from the Reserve Bank governor, puts the pressure on and forces interest rates up.

The other thing they sought to use in their argument was simply to deny reality. Despite the fact that the government are continuing their record spending—which is expansionary and the Reserve Bank has actually decided to raise interest rates, which is contractionary—the Treasurer stood in this place yesterday and denied reality. He said:

The fact is that both fiscal policy and monetary policy are both working and going in the same direction, just as they did when we were responding to the crisis. As the economy has begun to grow, monetary policy is gradually going to be withdrawn.

Interest rates are going up and monetary policy is contracting. Fiscal policy is expanding and the Treasurer is saying that it is going in the same direction.

I had to think about what sort of picture I could paint if I had to explain it to my young daughter. What does something look like when one is going in one direction and one is going in the other direction? I thought back to my own childhood days and I remembered Dr Dolittle and his pushmi-pullyu. For those who need to remember what the Australian government’s economic policy looks like, I can tell them that it looks like this picture: a pushmi-pullyu. One is going in one direction and one is going in the other direction. Now the Treasurer says that we have both of these things working in tandem. This is the Treasurer’s economic policy; it is a pushmi-pullyu. The government are standing there; they have one foot on the accelerator and the other one on the brake. It is called a burn-out, and that is what they are doing to our economy, time and time again.

But if the government will not listen to the opposition when we tell them what they are doing to interest rates and families trying to pay off mortgages, then why don’t they listen to some of the most eminent economists in this country? Talking about the stimulus, Warwick McKibbin said:

It was too big and wrongly focused. Now is the time to step back and reassess the situation.

What about Professor Garnaut? He said:

But once there are signs that the economy is recovering faster than had been anticipated, then it’s appropriate to pull back that stimulus at a faster rate.

Maybe the Prime Minister will listen to Kochie? Mr Koch said:

The Rudd government was commendably quick with its stimulus package to fight the downturn but now it has to be quick to wind it back or face the prospect of an economy which overheats and forces the Reserve Bank to come to the rescue and raise interest rates.

This is a government that is quite happy for the Reserve Bank of this country to do the heavy lifting of economic reform, to take the hard decisions on economics in this country. This government is happy just to stand back and let that happen without doing the heavy lifting—what they know they need to do in this budget.

They are conflicted. They know that they want to keep spending money all the way from now until the next election. In doing so they are going to make it harder for more than 200,000 people who they have just convinced to go out and buy a new home. Recently I was at Ropes Crossing talking to one such home buyer. They never thought rates would move this quickly. They never thought they would but interest rates will move quickly under this government because this government cannot stop spending. (Time expired)

See this speech in context