Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

My question is to Senator Minchin, the Minister representing the Prime Minister. Does the minister recall asking the then Labor Leader of the Government in the Senate on 23 June 1994: ‘Australia’s real interest rates are already amongst the highest in the world; is this not a reflection of this government’s mismanagement of the economy?’ Is the minister aware that at the time he asked that question Australia’s interest rates were 64 per cent of the OECD average? Isn’t it the case now that interest rates in Australia are 40 per cent above the OECD average? Aren’t our interest rates also the second highest among the 19 most developed countries in the world? Isn’t that, according to the minister’s own logic, a reflection of this government’s mismanagement of the economy?

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

I do not particularly recall that question, but I take Senator Sherry’s word for it that I asked that brilliant question back in 1994. The thing I do remember from 1994 very clearly was what Mr Beazley, the then finance minister, said when interest rates went up by no less than three-quarters of a per cent in one hit, in September 1994, to 9.5 per cent. Mr Beazley said:

... I point out that this is still a very low interest rate regime in Australian historical standards.

According to Mr Beazley in 1994, 9.5 per cent was a very low interest rate. I wonder what Mr Beazley thinks of an interest rate of 8.05 per cent. Of course, when he was in government, under Mr Keating and Mr Hawke, he never saw an interest rate as low as 8.05 per cent because interest rates never got that low under Labor, so Mr Beazley thought 9.5 per cent was a low interest rate. We are very proud of our record on managing fiscal policy in this country in order to endeavour to ensure that interest rates and therefore inflation remain low in this country.

In relation to Senator Sherry’s question on comparisons with the OECD, I take his word for it. I am prepared to accept his evidence without having checked it myself. On the face of it I will accept his evidence. What I would point out is that this country, almost uniquely, has had now some 15 years of continuous economic growth. The most remarkable thing is that in any other period in the history of this country, if we had had 15 years of continuous economic growth, we would now be at the point that we reached in 1989 when the Labor Party clearly said: ‘We’ve got to have a recession because the economy is growing too strongly. We’re going to have a recession and we’re going to have 17 per cent interest rates to crush the economy.’ That is what Labor did in government. They engineered a recession because they had lost control of the economy after that period of growth.

What is remarkable is that after 15 years of economic growth we still only have inflation at three per cent; we still only have a cash rate of 6.25 per cent. When you compare us to other OECD countries, you must always bear in mind that our economic growth rates have been much better than theirs over the last 10 years. We have grown much faster than the OECD countries. The OECD countries, by and large, have had to use low interest rate policies to stimulate their dying economies. The economies of Europe need massive stimulation because of their sclerotic approach to things like industrial relations. The countries of the OECD have industrial relations policies like the Labor Party’s, and that is why they have growth rates so low that they have to reduce interest rates to give the economy some stimulus. We are in a position where, after 15 years of growth, the cash rate is still only 6.25 per cent. In any other period in the history of this country, the Reserve Bank would have had to move to the sorts of rates we saw under the Labor Party which engineered a recession.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Won’t the new housing rate that the Prime Minister is so pleased about put us more than three percentage points above the average five per cent interest rate that applies in western Europe, Japan and North America—hardly all dying economies, Minister? Doesn’t that mean the Prime Minister’s claim that he has delivered record low interest rates is again totally false? And why are interest rates in Australia so much higher than the rest of the developed world, including economies doing well?

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

Firstly, it is a complete verballing of the Prime Minister, which should be retracted, to say that the Prime Minister said he was pleased about the interest rate rise. That is a ridiculous assertion to make. The Prime Minister made it clear in his press conference yesterday that he did not like seeing an interest rate rise. Of course we understand the position of Australian families who have to pay a higher mortgage interest rate. So that is a complete misrepresentation of the Prime Minister’s position. Secondly, on the question of the extent to which our cash rate is higher than those of western Europe or Japan, I have explained that those economies have had zero or very low growth rates for considerable periods of time and much higher unemployment than our country. They have had to use their monetary policies to try to stimulate their sclerotic economies. That is why, to the extent that there is any, the difference exists.