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Wednesday, 30 November 1983
Page: 3055


Mr SINCLAIR —Does the Treasurer anticipate that the money supply target of between 9 per cent and 11 per cent for 1983-84 will still be met, in light of the latest official M3 figures for the 12 months to October which, he will recall, show a rise of 13.1 per cent? He will recall that in the 12-month period to last February, the last 12 months under the previous Government, the M3 figure was within the target range established in the preceeding Budget. Has his Government been deliberately running a loose money supply policy well outside its targets in an attempt to influence interest rates while at the same time meeting its huge public sector borrowing requirement? Is there any occasion on which a blowout of this magnitude in the 12 months to October has been followed by the money supply target being met in the year to June?


Mr KEATING —That is a question from one of the great overshooters in monetary targets, a member of a government which rarely, if ever, met its monetary targets. I find it very strange that such a question should come from the other side of the House when the Government has made it so clear, in the sheer size and frequency of the bond tenders, that it is determined to reach its monetary target. I just make this point: Already the Government has raised about $6.1 billion in treasury bonds.


Mr Sinclair —Thirteen point one per cent.


Mr KEATING —Just wait for it. And about $1.6 billion in Australian savings bonds . The 9 per cent to 11 per cent target range would already have been met but for the capital inflow problem which we faced. I observe and I assert that the Government believes it will reach its monetary target. After all, we have until 30 June. In the four months to October the rate of growth in monetary aggregates of M3 was about 3.6 per cent, or 10.8 per cent annually. The range, of course, is 9 per cent to 11 per cent. On that basis, and extrapolating across the year, that figure could be met. I simply observe that one of the problems with the 13 per cent figure at the moment is that it has a lot of history from the period of the former Government. Indeed, the period of greatest-


Mr Howard —It was 10.6 when you came to government.


Mr KEATING —Mr Speaker, do we get any protection from the brain damaged Deputy Leader of the Opposition?


Mr SPEAKER —I ask the Treasurer to take his seat for the moment. Honourable members on my left, because of their positions, are given a degree of tolerance. I think they are reaching the limit of that tolerance, and I will have to take action. I call the Treasurer.


Mr Peacock —We have been very severely provoked by the Treasurer.


Mr SPEAKER —Order! The Leader of the Opposition does not help by answering back under such circumstances. I can only believe that he wants to follow the example of his illustrious predecessor. I call the Treasurer.


Mr KEATING —The 'twelve months to' figure of 13 per cent includes all of the last 12 months. The period of greatest monetary growth was in March of this year -about 3.6 per cent, from memory-at a time when no bond tenders were let because the present Deputy Leader of the Opposition thought that a jump in interest rates would react poorly against him in the course of the election campaign. The ballooning in monetary growth in March and April and the capital inflow we received after that time have blown the 13 per cent figure upwards. As time moves on and we get nearer to the end of the financial year, and as we get beyond March 1983 and drop off the figure for the 12 months from March 1982, that figure will start to get nearer to the Government's range of 9 per cent to 11 per cent. Given the fact that in the four months to October the annualised rate is about 10.8 per cent, the Government has every confidence that we will reach our monetary target.

We said in the Budget that we would be reviewing the monetary target in the course of the year. That is a review of both prices and output. In the formation of the monetary target we are working on a nominal output of 14 per cent which, on the broader deflater, is again 8 per cent for prices and 6 per cent for growth. The figure for growth may be a little higher because of the pick up in the farm sector. We will also make some attempt to consider the velocity question. At the moment we are looking at a velocity of 4 per cent, which brings us back to the mid-range figure of about 9 per cent to 11 per cent. If the Opposition really wants to understand how a monetary target is put together, we have made compensations in that velocity figure for the structural changes which have taken place in savings banks deposits and the effect that those changes have had upon M3. We have every expectation that the Government's monetary target can be and will be met as it is running at about 10.8 per cent. When we drop off the period of laxity of the former Treasurer, we will come back within range by 30 June.


Mr Newman —Mr Speaker, I raise a point of order in reference to the Treasurer's answer. I wonder whether we can have an interpreter service in future when he speaks.


Mr SPEAKER —There is no point of order.