Julian McGauran (Victoria, National Party) Share this | Hansard source

Senator Minchin, the greatest Minister for Finance and Administration that Australia has ever seen, is sitting at the desk at the moment. I would like to put on the record that the outrageous claim by Senator Conroy that Senator Minchin is the equivalent to Jim Cairns simply highlights what many of the public still have in their minds—that is, Labor cannot manage the economy. The comparison that Senator Conroy made was that the finance minister of Mr Gough Whitlam, the great icon from his own side, was a fool and that he wrecked the economy. That is the sort of comparison that those on the other side wish to make. Many Australians still remember how the economy was run by Labor governments.

No-one, as the finance minister said, welcomes a rise in interest rates, least of all those with mortgages. But many people have mixed mortgages, with both fixed and variable rates, and those who have savings, particularly those on a pension, have another view about interest rate rises. We agree that no government, particularly in the political cycle that we are in, seeks an interest rate rise. But what the other side fail to understand, as they always have, is that what we have is the integrity of the Reserve Bank making a decision for the good of the whole economy. The independence of the Reserve Bank was one of the first reforms that this government introduced when it first came into office. The Reserve Bank makes decisions with no fear, favour or political influence at all for the good of the whole economy. Its objective is to maintain inflation within the two to three per cent band and it is carrying out its objective.

As mortgage holders and Australian householders know, nothing eats into their savings, wages and business profits like runaway inflation. But the other side come in here and try to say that the government has jacked up interest rates with some voodoo economics when in fact we have an independent, non-political Reserve Bank making that decision on the grounds of strong demand and a strong economy. There is no feel in the marketplace of a boom-bust cycle. We have had 10-plus years of record growth, we have strong demand and we have a strong economy in which the Reserve Bank has independently undertaken its objective to maintain inflation. That is the basis of its decision. The Reserve Bank bases its decision on a strong economy. The fundamentals are that interest rates are—in comparison to those under the previous government—low, inflation is within the two to three per cent band, employment is at its lowest rate, growth is expected to continue at record levels and this government has zero debt and runs surplus budgets. They are the fundamentals of any economy and the Reserve Bank makes its decisions based on those fundamentals—fundamentals that are good. The economy is in a strong state.

Naturally, households, governments and businesses understand that there are fluctuations in interest rates, but these have not been the 1.5 per cent interest rate hikes made by the previous government and visited upon Australian households and businesses. The decisions to lift interest rates by that 1.5 per cent level were made by the previous government. They were made by the Treasurer of the time. What a disgraceful way to run the economy! The current government brought in reforms such as industrial relations reform and the independence of the Reserve Bank so as not to get the boom-bust cycle that we had in the past. The greatest danger to interest rates is not a surplus budget and zero debt, about which those on the other side are trying to mount some crazy economic case; the greatest threat to interest rates is debt raising by the states. This is acknowledged by the former Reserve Bank governor himself. Time does not allow me to develop the case relating to the states, but rest assured that others on this side of the House will. The states are the greatest danger when it comes to further and higher interest rates.