Mrs ELSON —My question is addressed to the Treasurer. Can the Treasurer advise the House as to the benefits for small businesses and home buyers of fiscal responsibility and the fostering of competition in the financial services industry? Can the Treasurer also inform the House of any recent movement in mortgage interest rates?

Mr Bevis —Let's get physical.

Mr SPEAKER —Order! We will all get physical in a minute. There are too many jocular asides in the chamber. This is day one of what is probably going to be a reasonably tough year. Let us get on with question time.

Mr COSTELLO —I thank the honourable member for Forde for her question. Official interest rates were cut by half a percentage point on 31 July 1996, on 6 November 1996 and on 11 December 1996. In June 1996, as a result of new entrants in the home loan mortgage market, there was a three-quarter of a per cent reduction in margins; that is, not related to official interest rates. As the Prime Minister has already said, cumulative cuts over the course of last year of 2¼ per cent on standard variable mortgage rates delivered $188 per month to the average Australian on the average mortgage.

Work done by the Reserve Bank also shows that in relation to small businesses, both on variable rates and on three-year fixed rate loans, the 1½ per cent three official cuts in interest rates have been passed on in the indicator rates offered by the banks. In relation to variable rates, there have been reductions from 11.25 to 9.75 per cent and, in relation to fixed three-year rates, there have been reductions from 10.1 to 8.5 per cent.

Having said that, I think it is important, particularly for small businesses, that they do see their banks and that they do negotiate with their banks to ensure that they get the benefit of those cuts in official rates. The government is not working on lowering interest rates for the benefit of banks but for the benefit of borrowers. I would urge small business people to take advantage of the reductions in those rates and go back and renegotiate terms with the banks to ensure that they get the full benefit of those reductions.

We are now witnessing a new round of competition induced reductions in interest rates. We have seen in recent times a new product being offered by the Professionals—a group of real estate agents which is now offering rates below the seven per cent level. Just yesterday the ANZ announced in relation to its no-frills money saver home loan that the loan rate has gone to 6.95 per cent. One of the newspapers remarked today that these could be the lowest home rates since the 1960s: the standard variable rate back at what it was—

Mr Wilton —And look at retail spending—it is down.

Mr SPEAKER —I warn the member for Isaacs.

Mr COSTELLO —The standard variable rate is back at what it was—the lowest since June 1974—and no-frills rates are as low as the 1960s.

I would encourage small business people to take full benefit of those opportunities; to make sure that their banks and financial institutions have passed on, and have passed on in full, the benefit of those reductions in rates; to shop around; and to use competition to work for them in relation to the new players coming into the market and the new opportunities that they represent.