Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is to the Treasurer. The Treasurer will recall saying in this House: ‘The price that must be paid by the Australian people for this government’s spending spree is higher interest rates, which the Reserve Bank said are now on the cards.’ Does the Treasurer agree with his own view that government spending sprees will result in higher interest rates?

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

I do welcome the question from the shadow Treasurer because it enables me to clear up a number of matters and distortions that the shadow Treasurer has been engaged in for some time. I am sure that whatever he quoted then certainly is not a reflection of my position. It is part of a determined campaign by those opposite to camouflage their vote against the stimulus by running a scare campaign, which claims there is some link between the government’s stimulus and any particular rise in interest rates that may be decided by the Reserve Bank independently of the government.

The first point is very clear. Interest rates are at record lows—50-year lows. These settings have been described by the Governor of the Reserve Bank as emergency settings. There were cuts to the cash rate of 425 basis points late last year and through into this year. Of course, that has brought great benefit, particularly to those with a mortgage. Someone with a $300,000 mortgage would have had the benefit of something like $9,000 a year. It was part of a powerful monetary policy response put in place by the Reserve to complement and to work with a very powerful fiscal policy response put in place by the government. The result of that is that our economy grew by 0.6 in the year through to June and without that stimulus it would have contracted. That was just the fiscal stimulus. Of course, the monetary stimulus has been on top of that. It is viewed around the world as being one of the most effective stimulus packages put in place.

The Governor of the Reserve Bank has also made the point that he is entirely comfortable with the fiscal stance of the government and its medium-term fiscal policy. He also made the point that, because rates are at emergency lows, at some stage into the future they will rise; they will be adjusted independently by the Reserve Bank. That brings me to the next point, and this is where those opposite are so desperate with their scare campaign. They come into this House and somehow pretend that global forces are not going to have any impact on interest rates in this country. Of course they will—they will have an impact in this country as they will have an impact around the world. The Prime Minister and I have made the point that rates internationally will rise over time as the global economy recovers, and we are not immune from that, and that will impact on the cost of credit in this country. The other factor that does impact on it is official decisions of the Reserve Bank which they take independently.

I would make the point that the 0.6 per cent growth figure that we recorded in June is well below trend growth. Trend growth came in at 0.6 for the year; that is, there is a lot of spare capacity in the Australian economy. But, of course, just as we are unwinding our fiscal stimulus as we go through next year, monetary policy will be adjusted as well. That is what happens when an economy begins to grow.

Those opposite are so desperate that they come into this House and somehow pretend that the fiscal stance of the government will have an immediate and direct effect on decisions of the Reserve Bank, when it is not the case. It is yet another scare campaign from those opposite to hide their embarrassment at the fact that they came into this House in February and voted against the package we put in place to support small business and to support employment in the Australian economy. Of course, now that they have been proved wrong by the data, by all international organisations and by the Australian business community, they seek to hide their embarrassment from that fact by constructing another fake and false scare campaign.

The business community in particular understands the importance in this country of having customers come through the door. The construction industry understands the importance in this country of our stimulus measures and the business community also understands that they are wound down over time. They were put in place to have the maximum impact in the June quarter, and we can see the results of that. As we go through subsequent quarters they will be wound down. That is as it should be, because fiscal stimulus is temporary and targeted. They cannot hide—

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

$40 billion from the 1st of July!

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

Sloppy Joe over there cannot hide his embarrassment that when the nation needed the Liberal Party to back the country they backed themselves. You can see the embarrassment on their faces here today. How do they go out and explain to the Australian community that when business needed the backing and when workers needed employing they were playing politics in the parliament. This distortion of what I have said in this House from the shadow Treasurer today is yet another example of another scare campaign to camouflage the fact that they have not got one positive idea for Australia’s future.