Laura Smyth (La Trobe, 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 outcome of today's Reserve Bank board meeting?

Julia Gillard (Lalor, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thank the member for La Trobe for her question. I would like to inform the House that the Reserve Bank today has announced it will cut the official cash rate by 25 basis points to 4.5 per cent—a decision just announced. As the nation gets ready for the race which stops us once a year, the Melbourne Cup, this will be a welcome relief for Australian families who are under cost-of-living pressures.

I understand that despite our strong economic fundamentals, and they are strong, parts of the community are doing it very tough and finding it very hard to make the family accounts add up to get the bills paid. So this news will come as welcome relief to them. It will be relief for families too as we move towards the festive season, when people want to make arrangements for Christmas and Christmas holidays.

Importantly, today's decision by the Reserve Bank confirms this government's strong economic management credentials. We do understand that families are under cost-of-living pressure and that is why we have introduced a range of measures to assist families, including increasing the childcare tax rebate to 50 per cent and creating the education tax refund to help with the costs of getting kids to schools. We are going to deliver an increase of $4,200 in family tax benefit A for the mums and dads who have teenagers, and, of course, we have brought in paid parental leave to help parents of very young babies. And we have secured an economy where 95 out of every 100 Australians who want a job have got a job. Our focus has always been on making sure that Australians have the benefits and dignity of work, and that is why we moved to put economic stimulus into our economy, to keep jobs for Australians when the global financial crisis threatened.

We have also come through with a strict fiscal discipline plan and we are delivering the fastest fiscal consolidation on record. The delivery of that fiscal consolidation and getting the budget back into surplus—back into the black—as promised, is very important. The government's strict fiscal strategy means we have created space in the economy for it to grow without adding to price pressures. You run a strict fiscal policy in order not to put upwards pressure on inflation, and that helps the RBA have the room it needs to move on monetary policy.

At the same time, our strong public finances continue to be the envy of the world. That point will come home to me very forcefully, I am sure, as I attend the G20 in coming days, where I will meet with leaders of other economies who are struggling with debt, who are struggling with high unemployment rates and who are struggling with the prospect of how they deal with their budgets, whilst we here, of course, have strong public finances, we have Australians in jobs and we are bringing the budget into surplus by engaging in strong fiscal consolidation.

We live in the right region of the world at the right time in history. Economic weight is moving from west to east. Our economy is strong now and we must keep reforming and changing to ensure that we maximise the benefits of the Asian century in which we live. Today's announcement by the Reserve Bank will be good news for Australian families to help take that bit of pressure off on this Melbourne Cup day.

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

My question is to the Prime Minister. The coalition of course welcomes lower interest rates, as we always have, but I reflect on the comments of the Reserve Bank board when they said that they are reducing interest rates because overall growth is more moderate and confidence is subdued. I ask the Prime Minister: given her Treasurer has been ignored by the banks on 50 separate occasions, will the Prime Minister guarantee that the banks will pass on to Australian households the cut in interest rates in full?

Julia Gillard (Lalor, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thank the shadow Treasurer for his question. Let me do two things: one, direct the House's attention to the complete paragraph that the shadow Treasurer quoted from; and, two, deal with his question about banks and passing interest rates on. I think it is very important that the House gets the full paragraph. I will refer to the full Reserve Bank statement and then I will refer to the paragraph that the shadow Treasurer referred to. The paragraph says:

Information about the Australian economy suggests moderate growth overall. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high.

In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, cautious behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little over recent months, though it remains close to 5%.

That paragraph of the Reserve Bank statement is pointing to the patchwork economy that the government talks about consistently. When you have a patchwork economy with resources steaming ahead and, as a result, the Australian dollar at historical high levels and sustained high levels, that does put pressure on other sectors of the economy that are trade exposed, including manufacturing. We have been talking about that for months and months and months—talking about the patchwork economy and how we are responding to it.

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

Talk, talk, talk!

Julia Gillard (Lalor, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

Before the opposition starts its little chant, one of the ways we are responding to it is through the minerals resource rent tax, because that is a pivotal instrument in a patchwork economy where you take more tax from the sector of the economy that is turbocharged and use that to spread economic growth throughout the rest of the economy. The only people in denial about the patchwork economy—

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

Mr Speaker, I rise on a point of order. I asked the Prime Minister to guarantee that the banks would pass on in full the cut to Australian households.

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

The member for North Sydney has used his point of order to repeat the last part of his question. The Prime Minister is responding to the question in totality.

Julia Gillard (Lalor, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I am responding to the first part of the question. I was concerned that the way in which it was phrased may mislead people about the Reserve Bank statement, and, because we constantly see negativity and misleading from the opposition, I have taken the opportunity to ensure that that misleading does not stand unchallenged. In relation to that negativity by the opposition, my point was—

Mrs Bronwyn Bishop (Mackellar, Liberal Party, Shadow Minister for Seniors) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order. I refer you to page 501 of the Practicewords that have been ruled out of order and asking the member to withdraw. Those words include 'misleading' and 'deliberate misleading', which the Prime Minister has been using all through question time. I would ask her to withdraw those remarks.

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

On the point of order, I have allowed, in the context of the debate, 'misleading'. I would not have allowed 'deliberate misleading'. The Prime Minister has the call.

Julia Gillard (Lalor, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

Thank you very much, Mr Speaker. In concluding on the first part of the question, which refers to the description of the patchwork economy in the Reserve Bank statement, the government has been explaining the patchwork economy to the Australian people for some time now. It proves the importance of the minerals resource rent tax, taxing the sector of the economy that is streaking ahead, to facilitate growth in other parts of the economy and opportunity for all. The Liberal Party are the only people in the nation who really believe that miners are paying too little tax.

On the second part of the shadow Treasurer's question, let me be very clear about this: I believe that Australian banks should pass on this interest rate cut in full. I said this morning to the media that, if the RBA cut interest rates today, Australian banking customers would be looking to their banks to cut interest rates in full. I believe that is what the Australian people want to see from the banks that they bank with. We have acted to increase banking competition. We believe that was very important. But let me be loud and clear about this: I believe the Australian community is looking to banks today to announce that they will pass this interest rate cut on in full.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Treasurer. Treasurer, will you outline for the House what today's Reserve Bank board outcome means for average Australians?

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

I thank the number for Fraser for his question. Today's decision is a win for Australian families with mortgages and it is a win for small businesses, whichever horse they back today. Those opposite have been asking questions about whether the banks should pass this interest rate cut through in full. Well, they should pass this through in full. Indeed, there is no excuse for not passing this through in full. Westpac has today announced a full pass-through of 25 basis points. This is a welcome decision in households with very large mortgages and it is certainly welcomed by small businesses.

The government, for its part, has done its bit. As the Prime Minister was saying before, we have put in place the fastest fiscal consolidation in history, and that has been recognised by both the International Monetary Fund and the Reserve Bank as being very important in terms of their deliberations. We are playing our part with fiscal policy.

Some points were made about the statement from the Reserve Bank. The Reserve Bank clearly points to the fact that inflation is moderating, that underlying inflation is back within the target band. They also make the point that there are adverse international conditions. These two factors, along with the government's fiscal policy, were what led them to take rates back to what they describe as neutral. Fiscal policy is very important in this. The government has put in place its fiscal policy because we do not want to add to inflationary pressures in our economy. That is why we have the fastest fiscal consolidation—that is, return to surplus—in our history.

Over and above that, the banks have a part to play as well. All banks should pass on this 25-point cut in full. One of the reasons why we have put in place a comprehensive package of competition reforms is that, if people are unhappy with their bank, they can walk down the road and get a better deal. That is why we have been steadily implementing fundamental reforms such as the abolition of mortgage exit fees, reforms to credit cards and so on—so the market is more competitive. So if somebody is unhappy with their bank, they can walk down the road and get a better deal.