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. Is the minister aware that today’s statement on monetary policy by the Reserve Bank expresses serious concerns about inflation, stating that ‘inflation appears likely to be somewhat higher than earlier expected’? Doesn’t the Reserve Bank statement note that this means that ‘further monetary policy tightening could be required’? Can the minister confirm that this means that further interest rate hikes could occur in coming months, on top of the five increases that have already occurred since the Liberal government promised it would ‘keep interest rates at record lows’? What would be the impact of further rate hikes on working families, many of whom are already spending a third of their income paying off their home loans?

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

I thank Senator Sherry for his question, and welcome him back and hope he has fully recovered. I have not had the opportunity to read the full statement on monetary policy but the Reserve Bank, in its charter, as Senator Sherry would know, is charged with ensuring that inflation remains in the band of two to three per cent. As I said in this place last week, the Reserve Bank, in making its decision to increase rates by another quarter of a per cent, made the point that the primary cause of that is the inherent strength of the Australian economy. Demand is strong, we have had some 16 years of continuous growth and we have unemployment at record lows. We have a very strong economy, and that is why the Reserve Bank in its wisdom has decided to bump up rates by another quarter of a per cent. That is consistent with its obligation to keep inflation in that two to three per cent band, and that is where we want inflation to stay.

As I said last week, the great thing about our period in government is that inflation has averaged 2.5 per cent, in contrast with the average rate of inflation under the previous Labor government of 5.2 per cent—more than double the rate of inflation that we have experienced under our government. It is the Reserve’s charter to ensure that it stays well below the rate that we experienced under the Labor Party. Of course, all the levers under our control are set to low inflation. We have restored the health of Commonwealth finances. We are running consistently strong surpluses of one per cent of GDP. We have paid off all of Labor’s debts so that we are not paying any interest on the debt any longer. We have reformed industrial relations to ensure that we do not get the sort of wage-price inflation that we experienced under the Labor Party.

If Senator Sherry is so concerned about inflation and its impact on interest rates then he should be working inside the Labor Party to ensure that it abandons immediately the idiotic ACTU policy it has been forced to adopt with respect to industrial relations. There is no doubt whatsoever that, if we go back to pre-Keating-era arrangements with respect to industrial relations, that will have a devastating effect on inflation in this country and, therefore, flow-on effects for interest rates and consequential devastating effects for Australian small businesses and Australian families, who will as a result of such a policy see a return to high unemployment, high inflation and high interest rates.

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. Haven’t interest rates gone up four times since the introduction of Work Choices? Doesn’t the Reserve Bank statement on monetary policy make it clear the government has lost control of inflation? Isn’t the government’s failure to control inflation directly responsible for five interest rate increases since the Liberal government broke its promise to working families to keep interest rates at record lows?

Robert Ray (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Senator Robert Ray interjecting—

Grant Chapman (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Chapman interjecting—

Paul Calvert (President) Share this | Link to this | Hansard source

Order! Senator Ray and Senator Chapman, come to order! I call Senator Minchin.

Robert Ray (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Senator Robert Ray interjecting—

Paul Calvert (President) Share this | Link to this | Hansard source

Order! Senator Ray! Senator Minchin has the call.

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

Mr President, you would think they would have more respect for the fact that this is your last question time as President. Certainly we respect that fact, and I would ask those opposite to respect that historic fact.

The remarkable thing about housing interest rates is that they are lower now than they ever were in 13 years under the Labor Party. Housing interest rates today are lower than they were when we came to office. Housing interest rates under us have averaged four percentage points lower than they did under the Labor Party, and inflation as at June 2007 was 2.1 per cent, well inside the band set by the Reserve Bank.