Mr McMULLAN (2:55 PM) —My question is to the Treasurer. Does the Treasurer recall saying on 25 October last year and, in fact, on numerous occasions in this House that driving the budget back into deficit would mean higher interest rates? Now that you have driven the budget into a $3 billion deficit, why should Australian families not conclude that you have added to the upward pressure on interest rates on their mortgages and credit card debts?

Mr COSTELLO (Treasurer) —The shadow Treasurer embarrassed himself yesterday by referring to the accrual outcome in the 2001-02 year—

Ms Plibersek —Why was he embarrassed?

Mr COSTELLO —I will tell you why he embarrassed himself: because he claimed that the accrual deficit had worsened since the midyear review when in fact the accrual position had improved since the midyear review. So, if you want to actually work off the accrual figures, in fact it had picked up between the midyear review and the budget—a point that you embarrassed yourself on yesterday, but that is fair enough. Again, if your point is that an accrual deficit of $3 billion would be having a current effect on interest rates, my point is that it has actually improved. It improved, so the fundamental premise of your question cannot be right. It cannot be right!

Mr COSTELLO —No, don't try to change the question now! Don't try to have a new one from the front bench—we will deal with the one that you actually asked. It is only the second question that you have asked since the budget came down. So, if the premise was that somehow a worsening accrual result was having an effect on interest rates, my answer is: actually the accrual balance improved. So, by your logic, it should actually have a positive effect in relation to monetary policy. I think I am entitled to point that out. But we will take the other point of your question, which lies behind it, which is this: apparently you believe it is important to have strong fiscal policy to keep interest rates low. That is the other assumption. If that were the case, you would be— would you not?—voting for the government's measures to save expenditure.

We have now heard five questions of `Why doesn't the government spend more?', followed by a question of `Why don't you have a larger surplus?' Why didn't we think of this—spending more and producing a bigger surplus! We had five years of this, remember. You were against every expense saving, you were against exemption measures, you were in favour of budget surpluses—

The SPEAKER —The member for Lingiari!

Mr COSTELLO —and you went down to the Fabian Society—

The SPEAKER —The member for Lingiari is warned!

Mr COSTELLO —which Bob was remembering operates as a wolf in sheep's clothing. He went down to the Fabian Society and said, `The public did not trust us on economic policy.' Is it a wonder that the public does not trust them on economic policy! I think the public have figured the Labor Party out—they figured them out over five years, and we hope they will figure it out over another three.