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Wednesday, 8 February 2012
Page: 277

Economy


Mr KATTER (Kennedy) (14:31): My question without notice is to the Treasurer. Section 10 of the Reserve Bank Act states that the bank pursue policies that 'best contribute' to the maintenance of full-time employment in Australia and the 'economic prosperity' of the Australian people. In light of this and yesterday's decision which will price more Australian goods and services off the world market, would he not agree that the continuation of this fight-inflation-only policy will jeopardise hundreds of thousands of jobs in tourism, manufacturing, agriculture, retailing and base metals? In light of the prevailing rates in the US, 0.13 per cent, Japan, 0.05 per cent, and the EU and Canada, one per cent, could he assure the Australian people that it will be pointed out to the RBA that continuing with a four per cent—

Opposition members interjecting

The SPEAKER: Order! Honourable members on my left will remain silent. The member for Kennedy has the call.

Mr KATTER: I can't hear myself speak, let alone listen to the galahs on my right.

The SPEAKER: The member for Kennedy will not continue to have the call if he makes those comments. The member for Kennedy will conclude his question.

Mr KATTER: In light of the prevailing rates in the US, 0.13 per cent, Japan, 0.05 per cent, and the EU and Canada, one per cent, could he assure the Australian people that it will be pointed out to the RBA that continuing with a four per cent-plus rate is contrary to their charter and is a policy that has already driven the dollar from US60c eight years ago to US$1.10 today?

The SPEAKER: I now call the honourable Treasurer and I suspect the member for Kennedy will understand that I gave him some benevolence.







Mr SWAN (LilleyDeputy Prime Minister and Treasurer) (14:33): I thank the member for Kennedy for that very important question, because he, like me, is a great fan of the late Ted Theodore, who was one of the early Keynesian advocates in this country and was indeed a former Treasurer of this country. Ted Theodore believed in appropriate fiscal and monetary policies that worked together to support employment and to support jobs and to support economic prosperity. One of the reasons we moved like we did through the global financial crisis and the global recession was to stimulate our economy through appropriate fiscal policy and appropriate monetary policy through the independent Reserve Bank. The consequence of that is that Australia is one of the strongest developed economies in the world, if not the strongest, according to the IMF. But you cannot be Keynesians on the way down and not be Keynesians on the way up, and our current policy settings, our fiscal policy settings and our monetary policy settings, reflect the strength of our economy relative to the rest of the world.

As for those countries that the member for Kennedy referred to, where he talked about low interest rates, those are countries which have very, very high levels of unemployment and they have very big problems in terms of sovereign debt. We do not want those problems in this country. We have not got those problems in this country because we have deployed fiscal and monetary policy in an appropriate way. Indeed, if you look at the reports from the IMF, the OECD and the World Bank, they have all made the point that in Australia the deployment of monetary and fiscal policy has been the most effective in the Western world. The consequence of that is a rate of interest that some people may feel uncomfortable with, but could I make this point. The cash rate in this country is currently 4.25 per cent and when we came to office it was 6.75 per cent. And, of course, if you take a $300,000 mortgage, that is a saving of $3,000 per year for a family with that mortgage.

What we must do is dedicate ourselves to taking every responsible step to keep pressure off inflation so we can keep rates down. The most important thing that we have got to do to generate jobs in this country, to generate wealth and to spread the opportunities around the country is to deploy our fiscal policy appropriately, and that is what the government is doing by bringing the budget back to surplus, and the independent Reserve Bank will take its judgments from time to time on monetary policy. We had two rate cuts at the end of last year and they were welcomed. Yesterday the Reserve Bank decided they would hold, but they did make the point that if further cuts were required there was room. Why? Because of the appropriate fiscal policy that the government has in place right now, which has received a big tick from the IMF. (Time expired)