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Wednesday, 1 June 2005
Page: 66


Mr SWAN (2:06 PM) —My question is to the Treasurer. Does the Treasurer recall his comments in this House yesterday to the effect that Australia, now AAA-rated for foreign currency bonds, no longer pays any premium in relation to interest rates? Does the Treasurer still stand by that statement? Can the Treasurer explain why Australians are paying some of the highest interest rates in the world—higher than the US, the EU, Japan, Canada and Britain? Is it a fact that Australian homebuyers are paying higher interest rates than other countries because we have consistently high current account deficits and foreign debt?


Mr COSTELLO (Treasurer) —The answer is no. If the current account were the cause of domestic home mortgage interest rates, why would they today be 7.3 per cent when under the Labor Party they were 17 per cent? Why would they today be 7.3 per cent when under the Australian Labor Party they were 17 per cent? Why would they today be 7.3 per cent when at the time the government was elected they were 10.5 per cent?


Mr Kelvin Thomson interjecting


Mr COSTELLO —Let me make this point: there is one clear difference between now and 1996. It is this: in 1996 the budget was in deficit nearly three per cent of GDP and today it is in surplus. In 1996 Australia owed $96 billion and by 2005-06 we could have that as low as $6 billion. This is the government that took $96 billion of Labor Party debt and will retire $90 million of it—


Mr Kelvin Thomson interjecting


The SPEAKER —The member for Wills is warned!


Mr COSTELLO —forever taking that load off future Australians. Let me make this final point: all other things being equal, if a government is borrowing, it is driving up interest rates; if a government is saving, it is driving down interest rates. When Labor was in office Labor was borrowing and driving up interest rates. Interest rates peaked at 17 per cent and in 1996 they were 10.5 per cent. This government has not borrowed a dollar in net terms since 1996 and by paying off $90 billion of Labor Party debt this government has put downward pressure on interest rates, which are now at 7.3 per cent, a level which was unheard of under the Australian Labor Party.