Michelle Rowland (Greenway, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. What role have the fundamentals of Australia’s economic framework played in delivering 20 consecutive years of economic growth, and why is it so important they be preserved?

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

I thank the member for Greenway for that very important question. Members may not be aware, but Australia is entering its 20th continuous year of economic growth. That is not something that can be said about other advanced economies. This is a very substantial achievement. This very substantial achievement has been built on 25 years of economic reform. It has been built on a floating dollar, a deregulated banking sector and the independence of the Reserve Bank when it comes to monetary policy. Of course, it was this framework, along with the government’s timely stimulus, that did so much to support growth in this economy and to make sure that Australia, unlike many other developed economies, avoided recession. So this consensus has been very important. It has been very important to domestic confidence. It has been very important to international confidence.

In the last week it has been challenged on two occasions. We had the member for Goldstein suggesting that we should be fixing the dollar and today we have had the member for North Sydney arguing for the removal of the Reserve Bank’s independence for re-regulating interest rates. These two initiatives from those opposite are a grave challenge to the foundations of that economic model which has delivered 20 years of continuous economic growth. I think even John Howard or Peter Costello, for all their faults, would wince at the statements today from the member for North Sydney, because they risk fracturing that economic consensus that has been so important to confidence domestically and confidence in the international economy. It is an attack upon the very pillars of our prosperity and therefore an attack on prosperity itself.

It is the case that we do need an informed debate about these matters, and the government welcomes a debate about all of these matters. The first principle is the independence of the Reserve Bank, no matter how uncomfortable that may be for any of us from time to time. The Reserve Bank has made it very clear that net interest margins are back to their pre-crisis level, and I have indeed made it very clear on a number of occasions. The Reserve Bank observed this in their Financial stability review, and I have remarked publicly about that. It was observed again in the Reserve Bank board minutes. So I say again: there is no justification for any bank to move over and above any rise that is delivered by the Reserve Bank in the cycle, not that I am speculating about their decisions. But what we do know is that the action that has been put forward today by the member for North Sydney is a challenge to the independence of the Reserve Bank. He is turning his back on 20 years of economic reform.

What Australians want is concrete action, not populist rhetoric. That is why we on this side of the House have put in place some essential reforms—a very big investment in AAA rated residential mortgage backed securities, for example, to give a flow of funds to the smaller lenders to challenge the bigger banks. That has been very important. Then there are the new credit laws, which will challenge unfair charges from banks when people exit mortgages. These are all very, very important reforms and they are part of responsible economic management—the responsible economic management that saw Australia avoid a recession, that saw Australia generate a very significant—(Time expired)