Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

I read the Reserve Bank statement very carefully and I did not see any reference to the Prime Minister having told the Reserve Bank to increase interest rates. The Reserve Bank is independent. The Reserve Bank does have a charter to keep inflation between two and three per cent over the economic cycle. The Reserve Bank has decided that, because of factors that I mentioned before—the strength of the world economy, high commodity prices and the strength of the Australian economy, meaning that it is important to keep inflation under control and to maintain the prosperity that we have—the cash rate should go to 6.25 per cent. That will take the home mortgage interest rate to 8.05 per cent, which will of course still be considerably lower than the 10.5 per cent we inherited when we came into office. When we came into office and inherited government from the Labor Party, the standard mortgage variable interest rate was 10.5 per cent. When it increased to 9.5 per cent under Mr Beazley as finance minister—remembering that Mr Keating’s boast was that he had the Reserve Bank in his pocket—Mr Beazley said that 9.5 per cent was a low mortgage interest rate. Today’s rate of 8.05 per cent compares comfortably to that, and it certainly compares comfortably to the 10.5 per cent mortgage rate when we came into office.

The government have worked assiduously to ensure that, to the extent that a federal government can, we keep pressure off interest rates. The way we have done that is by eliminating the $96 billion in debt that we inherited from the Labor government when we came to office. The interest payments out of the government budget were some $8 billion a year. We were spending as much on interest on the government debt as we were spending on defence or education—an outrageous position for the government to be in. We found that we had inherited from them a deficit of $10 billion a year.

The most significant thing any federal government can do to take the pressure off interest rates is to ensure that, through its own fiscal management, it does not add to pressure on interest rates. We have done that by eliminating that $96 billion debt without any help from those opposite. We have returned the budget to surplus and run strong surpluses, which on occasion those opposite have the audacity to actually attack us for—for running high surpluses. It is the high surpluses and the removal of debt that enable the federal government to do our utmost to reduce the pressure on interest rates. The other thing that we can do to ensure that we minimise the pressure on inflation and therefore on interest rates is to decentralise and deregulate the industrial relations framework in this country. Again, these are great achievements by this government which have been opposed all the way by those opposite.