Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

My question is to the Treasurer. I refer him to Professor Ross Garnaut’s comments on ABC television last week about the need to wind back the government’s stimulus in response to better than expected economic conditions when he said:

… once there are signs that the economy is recovering faster than had been anticipated, then it is appropriate to pull back that stimulus at a faster rate.

Treasurer, how many more interest rate hikes will it take before you start listening to sensible calls to wind back your reckless spending?

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

It does not take them long to get back to a scare campaign on interest rates, does it? Everybody in this House remembers the last time those opposite got up here and ran a scare campaign on interest rates. It was back in about 2006, after an election where they promised to keep interest rates at record lows. That was the television advertising. Of course, then rates went up 10 times—10 times, after they promised to keep rates at record lows. In the middle of that, we had a revelation from the now Leader of the Opposition. When they went up a fifth or six time, the Leader of the Opposition was asked about one of these 25 basis point rises and he said they were ‘over dramatised’.

The opposition have form on interest rates and they have form on scare campaigns. They are now attempting to mount one on the decision of the Reserve Bank to put up interest rates by 25 basis points from their 50-year emergency low. The Reserve Bank governor made the position here absolutely clear. He said that when rates are at an emergency low, they will at some time in the future move from that emergency low when the emergency has finished. That was the point that he made after the Reserve Bank board’s decision.

The Governor of the Reserve Bank has been absolutely emphatic that his decision has been taken to move those interest rates from an emergency level because the economy is recovering and it has got nothing to do with the government’s fiscal policy. He made that absolutely, emphatically clear on two occasions, including at the end of September when he kicked most of the opposition who were at the parliamentary hearing out of the room when they were asking their dorothy dixers and did not get the answers they wanted on this and many other questions. He explicitly repudiated the proposition that has been put forward by the shadow Assistant Treasurer. He made it very clear that rates are moving from emergency lows because the economy is recovering.

The fact is that monetary policy and fiscal policy are both working together as the economy recovers. Any attempt by those opposite to somehow blame interest rate rises on the fact that the economy is recovering and suggest that it has got something to do with fiscal stimulus shows how desperate they are. It absolutely shows how unfit for government they are as well because they want to pretend that somehow emergency level, 50-year lows could just magically stay there forever. Well, they cannot and those opposite know it. When they seek to argue that, they show how unqualified they are for government and how unfit they are to conduct a sensible debate about how we go through recovery from the impact of a global recession. They have been repudiated by the Reserve Bank governor, they have been repudiated by most respected commentators and, of course, they have become a laughing stock as a consequence because they are putting forward propositions which do not add up. What it shows is monumental incompetence.

Mr Garnaut did make some comments. He heartily endorsed the government’s fiscal stimulus strategy and made the unremarkable comment that it should be withdrawn gradually over time. It was an unremarkable comment because it is being withdrawn over time. It will subtract from growth every quarter next year. But the proposition being put forward by those opposite is that all of it should be immediately withdrawn. The Secretary of the Treasury gave evidence to the parliamentary committee about that as well and pointed out that the impact of that would be the loss of a further 100,000 jobs and the closure of tens of thousands of small businesses. So what the shadow Assistant Treasurer has demonstrated in the House today, indeed as the Leader of the Opposition has demonstrated since this decision was taken by the Reserve Bank, is how unfit they are for government and how unqualified they are to be taking the sorts of judgements that are required by governments in these circumstances to carefully manage a recovery.

That is what we will do. We will carefully manage this recovery. We most certainly will not take their advice to rip the rug out from underneath that recovery by pulling stimulus out altogether. That is their proposition. It shows that they simply do not understand the importance of jobs, do not understand the importance of small business and do not understand the importance of stimulus to sustaining prosperity in this economy during a period of great uncertainty in the global economy.