Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Why did the Treasurer beg the Reserve Bank to raise rates at the beginning of the year when he said inflation, then at three per cent, was out of control and yet now, when the Reserve Bank says it is heading for five per cent, he is begging the banks to bring rates down?

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

It just shows that those opposite have not got a clue when it comes to the very basic elements of national economic policy—no understanding of the role of fiscal policy and no understanding of the role of monetary policy. I have already quoted what the IMF had to say about our budget and the role that it played in taking pressure off the Reserve Bank to get itself in a position to loosen monetary policy. Our surplus is absolutely fundamental in that and, if those opposite think they can blow a $6 billion hole in our surplus and it may not have any ramifications for future Reserve Bank decisions, they have another think coming. They are living on a different planet. We do still have in this community a substantial inflation challenge. One of the reasons the Reserve Bank is able to talk as it has been talking in recent times is that we put our budget together to take pressure off the Reserve Bank.

Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Mr Speaker, a point of order on relevance: it is not a question of a different planet; the Treasurer is answering a different question.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The member will resume his seat. The Treasurer is responding.

Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

We said from day one we would tackle the inflation challenge. It was the right thing to do by the country. It was the right thing to do to get downward pressure on inflation so we could get downward pressure on interest rates. And that is what we have been doing, because we are dealing with the legacy of the 10 interest rate rises that occurred under the former government that have pushed interest rates to record highs. Those interest rates at record highs are slowing our economy and slowing our economy precisely at the time that international circumstances are also impacting. That is why the decisions taken in the Liberal party room yesterday are so utterly irresponsible and why those opposite should be condemned for their irresponsible behaviour.