Malcolm Turnbull (Wentworth, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister. What does the Prime Minister say to working families who heeded his warnings of an inflation monster and locked in their mortgages at fixed rates well above the current variable home loan rates? Prime Minister, how can these working families shop around for lower interest rates when banks are charging them thousands of dollars to move from high fixed rates to lower variable rates?

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

The Leader of the Opposition asks a second question about inflation. I would draw the honourable Leader of the Opposition’s attention to this fact: in the period that the Liberals were in office, inflationary pressures caused the Reserve Bank to increase interest rates 10 times in a row. Normally what you try to do with fiscal policy is to act in concert with those running monetary policy. What did they do in the course of 2007 and before? In a period of considerable expansion in the Australian economy coming off the back of a global resources boom, what you had instead was the government, through its fiscal policy, adding to demand in the economy. At the time at which this government took office we had government expenditures running at five per cent real in terms of their growth rate in the past—in other words, fiscal policy was adding to the pressures which exist in the economy. What, therefore, did the Reserve Bank do? They stuck up interest rates—not just once, not just twice but 10 times in a row. The responsible course of action by those opposite would have been to have adopted a more cautious approach to fiscal policy at the time. They failed to do so. That is why interest rates rose. I would suggest that the Leader of the Opposition reflect carefully on the economic circumstances which gave rise to those high interest rates in the past and the actions which should have been taken.