Mr HOCKEY (2:09 PM) —My question is to the Treasurer. I refer to broad market expectations that interest rates will increase by up to one per cent over the next 12 months. That is more than $3,000 per annum on the average home loan. When will the Treasurer listen to the advice of the coalition, the IMF—

Mr Albanese interjecting—

Mr HOCKEY —It’s free advice, old china—free advice. When will the Treasurer listen to the advice of the coalition, the IMF, the Reserve Bank and his own Treasury and cut government spending to reduce upward pressure on interest rates?

Honourable members interjecting—

The SPEAKER —Order! The House will come to order!

Ms Gillard interjecting—

The SPEAKER —The Prime Minister!

Mr Martin Ferguson interjecting—

The SPEAKER —The Minister for Tourism might enjoy tourism.

Mr John Cobb interjecting—

The SPEAKER —The member for Calare might join him on the tour. The Treasurer has the call.

Mr SWAN (Treasurer) —I thank the shadow Treasurer for his question. His question is based on a false premise, and it is part and parcel of an interest rate scare campaign that has been run unsuccessfully by those opposite for years and years. The fact of the matter is this: the Governor of the Reserve Bank has said that the finances of the Australian government are in terrific shape. Those opposite like to pretend that the global recession never happened and that we should not have put in place stimulus to support jobs and small business, and they want to continue with the fiction that somehow the deficit that is in place and being wound back by us is having an impact on interest rates. It is not. You only have to look at the statements of the Governor of the Reserve Bank and, indeed, the statements of bodies like the International Monetary Fund, the OECD, the Reserve Bank and the market economists that I was quoting in this House yesterday.

The fact is that when those opposite were last in power the cash rate went to 6.75 per cent and interest rates went up 10 times in a row, and that happened after they said they would keep rates at record lows. We will not be engaged in the dishonesty that they are engaged in by pretending that we can control interest rates. Those are decisions for the Reserve Bank. But what we as the government of Australia can do is to keep our national finances in the best shape we possibly can, and that is what we are doing.

Yesterday I indicated that we are engaged in the fastest fiscal consolidation since the early 1960s, and we are being given the big tick by the IMF and the Governor of the Reserve Bank for doing that because that is the responsible thing to do in these circumstances. I make the point that interest rates now are lower than they were for 95 per cent of the time that those opposite were in government. The fact is that they did lose control of the economy in their last year in office, and their reckless spending did put upward pressure on interest rates at that stage. They went on a spending spree at the height of a mining boom.

It has fallen to us to put in place responsible economic management which will put downward pressure on inflation and downward pressure on rates, but those opposite should not pretend that governments can control what the Reserve Bank will do when the economy is recovering and it adjusts rates. Governments cannot do that, but what governments can and must do is put in place responsible fiscal policy. That is what this government is doing, and we are doing that in the interests of the Australian people.