Jodie Campbell (Bass, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister update the House on the Reserve Bank of Australia’s decision today on interest rates?

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

I can inform the parliament that the Reserve Bank of Australia has just announced that it will cut interest rates by 0.25 per cent. This, the first interest rate cut in seven years, will take the official cash rate down to seven per cent and will provide some modest relief to mortgage holders right across Australia. The government knows that there is still much, much more to be done in helping Australian families dealing with cost-of-living pressures.

For the average mortgage, today’s interest rate cut will put nearly $600 each year back into the family budget. I am advised that for 740,000 first-time buyers this will be the first time they have ever experienced an interest rate cut. The government expect the banks to pass on this rate cut because, given the high levels of profitability for Australia’s commercial banks, we believe that they have a responsibility to do so. If you pass on interest rate hikes, you have a responsibility also to pass on interest rate cuts.

This interest rate decision is welcome, but it is not a day for celebration. Interest rates took a long time to rise, and they will take a long time to come back down—and the road will be a very uneven one on the way through. That is why the government is committed to continuing a policy of responsible economic management designed to make it as easy as possible for the Reserve Bank in the future to reduce interest rates further.

I would add one final point. There will be more tough times ahead as we continue to battle the economic turbulence abroad and high inflation and interest rates at home. That is why the government is absolutely committed and determined to prosecute its program of responsible economic management into the future—a program of long-term economic reform based on an education revolution, based on our reforms to infrastructure and based on our program of business deregulation—because the government is determined to steer the Australian economy through the difficult times which lie ahead.

Brendan Nelson (Bradfield, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister. Prime Minister, is the government having Australians pay for this interest rate cut with their jobs?

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

I find it remarkable that the Leader of the Opposition seems not to welcome this cut in interest rates. I find that remarkable—

Opposition Members:

Opposition members interjecting—

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

Order! The question has been asked.

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

To return to points raised by those opposite earlier today, there is this assumption that you cannot prosecute a strategy dealing with the long-term challenges of inflation at the same time as prosecuting a strategy which deals with the long-term challenges of employment. Those opposite seem to think that you can have one or the other. We believe we can prosecute a strategy for the long term which deals with the inflation challenges for the economy as well as the challenges for employment, education, skills and training. And that is very much at the heart of the government’s economic strategy.

I am surprised, however, given the Leader of the Opposition’s intervention in this debate today on interest rates, that we have a further evolution of the Nelson doctrine from yesterday. The Nelson doctrine yesterday I thought was a pretty remarkable one. It said essentially this: that, on the question of interest rates, Brendan will say one thing in opposition but—

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

Order! The Prime Minister will refer to members by their titles.

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

he will do exactly the opposite in government. That is the articulated Nelson doctrine from yesterday. What he says in opposition he will now guarantee to do exactly the reverse of if in government. That is what he said yesterday. And the exchange yesterday, that memorable exchange on the doors, about his attitude to the Reserve Bank and providing them with instructions to cut official interest rates by 50 basis points, and his then turning round and saying, ‘Of course, if I were Prime Minister, I would not say that at all’—that is remarkable. There is one question I would pose to the Leader of the Opposition, and it is this: when does this Nelson doctrine end? If the Nelson doctrine is one which says, ‘What I say today on interest rates as Leader of the Opposition does not’—

Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order. The Prime Minister was asked a very specific question about whether Australians are paying for this interest rate cut with their jobs. I ask the Prime Minister to take the question seriously and answer it.

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

Order! The Manager of Opposition Business will resume his seat. The Prime Minister is responding to the question. I will listen carefully to the answer.

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

In my answer to the question earlier on about inflation and employment, I responded with what the government’s strategy was in respect of both those propositions. On the question of the relationship between inflation and interest rates, that is what I am going to. We have spoken already about the government’s strategy for creating an environment to bring down inflationary pressures so that the Reserve Bank has more room to bring down interest rates, and I am contrasting that with the position adopted by the Leader of the Opposition. The Nelson doctrine yesterday—

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Nobody asked you to.

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

Well, you may not have asked me to elaborate on the Nelson doctrine. I can understand why you may not have wanted to ask me to elaborate on the Nelson doctrine. But I intend to elaborate on the Nelson doctrine—

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

Order! The Prime Minister will—

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

because the Leader of the Opposition—

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

place his remarks through the chair and ignore the interjections. Interjectors will cease.

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

says, constantly, that he is the alternative Prime Minister of Australia. And what he has said is that, on interest rates—something so fundamental to households, to businesses, to the economy—the Nelson doctrine articulated yesterday is: ‘What I say as Leader of the Opposition, I will not say if I am Prime Minister of Australia.’ That is what it says. So my question to the Leader of the Opposition is: where does that leave his credibility—

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

Order! The Prime Minister will resume his seat.

Government Members:

Government members interjecting—

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

Order! Those on my right!

Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order—again, on relevance. The Prime Minister is trivialising job losses—

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

Order! The member for North Sydney—

Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

I ask him to answer the question he was asked.

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

will resume his seat. Order! The Prime Minister will respond to the question.

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

So, on inflation and on the challenges of employment, the government strategy is clear cut. We intend to prosecute a clear-headed strategy on both of those things for the future, because those opposite have not put forward any positive policies whatsoever. But why the member for North Sydney is so agitated on this is because this doctrine announced yesterday by the opposition has them in all sorts of trouble from here on in. When do we know that what the Leader of the Opposition says is suspended for the purposes of future policy credibility and accountability?

Warren Truss (Wide Bay, National Party, Shadow Minister for Infrastructure and Transport and Local Government) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order. The Prime Minister’s comments are not relevant to the question that was asked, and I ask you to bring him to order.

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

Order! The Prime Minister will respond to the question, and—

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

Thank you very much, Mr Speaker. So, on these critical questions of employment and inflation, we have a clear-cut strategy for the future. Their strategy is this: what they say in opposition they will not commit to do in government. That is opportunism writ large.

Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. What does today’s decision by the RBA mean for families?

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

I thank the member for his question, because this is certainly a decision that working families deserve. They are still doing it tough. They are certainly doing it tough. But a bit of relief is certainly welcome. So for the Reserve Bank to take this decision today is certainly very welcome—although it does not seem to be supported by those on the other side.

Today’s cut by the Reserve Bank will put nearly $600 a year back into the hands of a family with an average mortgage. Families have waited a long time for this relief. This is the first interest rate cut by the Reserve Bank in seven years. Some 740,000 families have never known a decision by the Reserve Bank to cut rates. It has taken seven years. And, of course, we know why that is the case: because Australian families had to endure 10 interest rate rises in a row under those opposite, and that added something like $400 a month to the mortgage bill of an average person with a mortgage—$400 a month. That was certainly the legacy of the member for Higgins—one that those over there are continually in denial over.

I have made it very clear indeed that I expect the banks to pass on the cut announced by the Reserve Bank today in full and in a reasonable time. I have now had handed to me some of the information about what the banks intend to do in passing on this rate cut. The NAB will pass it on effective from Friday, 5 September, Westpac will pass it on effective from 4 September and the ANZ and the CBA will pass it on effective from 8 September. That is certainly going to be welcomed by many people out there. It will be welcome relief, but there is still so much more to do to take pressure off inflation and interest rates. I will quote from the first paragraph of the Reserve Bank’s statement today:

Inflation in Australia has been high over the past year in an environment of limited spare capacity and earlier strong growth in demand.

What is that talking about? It is talking about the 20 warnings that those opposite received from the Reserve Bank over a three-year period. It is talking about the need for nation building to solve capacity constraints in the economy. Of course, then there was the reckless spending by those opposite that the member for Higgins admitted to in the Howard biography. What we are going to do is put in place a responsible economic policy which deals with investment in the future through nation building and which puts in place a disciplined fiscal policy. I think you can tell that those opposite today do not really understand how tough families out there are doing it. For the Leader of the Opposition this is just some form of political opportunism. We have seen that in question time today. He wants to score a political point about this instead of welcoming this move. This is very welcome news for Australian families, very welcome news for the Australian economy, and it is good news that should be celebrated by all in this House.

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

My question is addressed to the Treasurer. I refer to the statement issued today by the Governor of the Reserve Bank, Glenn Stevens, which states:

… it is looking more likely that household demand will remain subdued and overall economic growth slow over the period ahead.

Is this the slowdown we had to have?

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

I was talking before about the political opportunism and the stupidity of those opposite, and it is just so evident in that question. Why is the economy slowing? It is slowing under the weight of 10 interest rate rises in a row under those opposite—something they want to forget about. They do not want to admit to 10 interest rate rises in a row and the impact that is having on the growth prospects of this economy.

The member for Wentworth was on AM this morning and he pretended that there was no such thing as 10 interest rate rises in a row and that they could not have had any impact on domestic growth. Then he wanted to ignore the impact of global economic conditions. He was pretending that the global oil price spike had not happened. No, there was no impact on inflation from that. He was pretending that global financial market turbulence is not pushing up borrowing rates for households and business. He was pretending that it has not had any impact on stock markets. It has had a big impact, and this government is dealing with it responsibly through a responsible fiscal policy—stopping their reckless spending and building a surplus, which they are now attacking in the Senate; putting in place the essential investment for nation building to solve those capacity constraints that have put upward pressure on inflation and interest rates. Of course, all they are worried about over there is their own individual leadership prospects. Plan A over there, the Leader of the Opposition, is just worried about what it will mean for his leadership.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Mr Speaker, a point of order on relevance: this has nothing to do with the question that was asked and I please beg you to bring the Treasurer back to the question.

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

The Deputy Leader of the Opposition will resume her seat. The question was a broad question and the answer has been broad so far. But I will listen carefully to the relevance of the rest of the answer.

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

It was a question about interest rates, it was a question about sustainable employment growth, it was a question about prosperity, and what stuns me in this House today is that we get such juvenile questions from the opposition. This is a very serious question. Plan A over there, the Leader of the Opposition, is just worried about what it means for his leadership. Plan B up the back, the member for Higgins—

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Mr Speaker, on a point of order: is that part of the answer relevant to the question?

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

The Deputy Leader of the Opposition will resume her seat. I will be listening carefully to the answer. The Treasurer has the call.

Ms Julie Bishop (Curtin, Liberal Party, Deputy Leader of the Opposition) Share this | Link to this | Hansard source

Mr Speaker—

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

The Deputy Leader of the Opposition will resume her seat.

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

Plan B up the back, the member for Higgins, is worried how it will highlight his dreadful record when it comes to 10 interest rate rises in a row. Of course, we have Plan C, the member for Wentworth. He is smiling through gritted teeth.

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

The Treasurer will bring his answer to a close.

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

He is smiling through gritted teeth.

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

The Treasurer will conclude his answer.

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

Plan C is smiling through gritted teeth. Do you want to know why?

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

The Treasurer will resume his seat.

Don Randall (Canning, Liberal Party, Shadow Cabinet Secretary) Share this | Link to this | Hansard source

Mr Speaker, it is obvious that my point of order is relevance, as has been previously brought to your attention.

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

The Treasurer will conclude his answer relevantly.

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

Certainly, Mr Speaker. Plan C over there said interest rates were overdramatised.

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

The Treasurer will resume his seat. The Treasurer has resumed his seat. That is it.