Kevin Rudd (Griffith, Australian Labor Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister. I refer the Prime Minister to his party’s 2004 promise ‘to keep interest rates at record lows’. What does the Prime Minister regret most: making the promise or breaking it?

John Howard (Bennelong, Liberal Party, Prime Minister) Share this | Link to this | Hansard source

The thing that I regret most is the impact that any interest rate rise will have on working families. That is the thing I regret most. If the Leader of the Opposition were interested in the human impact of these things rather than the politics, he might have addressed his question to the impact of things on Australian families. I remind the Leader of the Opposition that the most definitive thing I said in the election campaign of 2004 was in answer to a question from Neil Mitchell, ‘So you would not be embarrassed to win the election and then have an interest rate rise?’ My answer was: I do not seek to give guarantees or judgements about individual movements. It is my argument that they will always be lower under our policies,’ and that argument is supported by the last time Labor were in government and the impact of their industrial relations policies.

For the benefit of the House and for a wider audience, I repeat what I said in answer to this question. I regret very much the adverse impact of any interest rate rises on Australian homebuyers. I regret that very much. I would, however, remind the Leader of the Opposition that when the current increase in the cash rate is passed through to housing loans the level of the average housing loan in Australia, at 8.3 per cent, will still be lower than it was at any time under the Hawke and Keating governments. I would remind the Leader of the Opposition that interest rates for housing loans averaged 12¾ per cent under the former government, and that is a full 4½ percentage points higher than those interest rates will be as a result of today’s increase in the cash rate. Notoriously, of course, interest rates hit 17 per cent in the late 1980s.

I also remind the Leader of the Opposition that the industrial relations policy that he is handcuffed to, if implemented, will push up interest rates. That is the view of economists and of business organisations. It stands to reason that, if you deregulate the labour market and re-establish a centralised wage-fixing system, you will create wages breakouts in areas of the economy that cannot afford to pay those high wages, with adverse consequences for unemployment and for higher interest rates. I say that without moving into the area of fiscal policy, where, despite the Leader of the Opposition’s protestations of conservatism and responsibility, in the eight or nine years he has been in this place he has voted against every attempt by the government to get the budget back into balance and into surplus.