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Wednesday, 1 April 1987
Page: 1865

Mr HUNT —The Minister for Primary Industry will recall that when he said in August 1985 `This Budget will bring interest rates down' the prime lending rate was 17.75 per cent. Does the Minister accept that the prime rate has remained above that level and that the Australian rate is now almost 11 per cent higher than the United State prime rate, to the disadvantage of Australian farmers, small business and prospective home buyers? As the Australian dollar has now appreciated to more than 70c against the United States dollar, what excuse does he offer the family farmer and others for the breach of his 1985 promise that interest rates will fall? Although it is April Fools' Day, I invite the Minister to address himself seriously to this question: When will the farmers and others witness a significant fall in interest rates?

Mr KERIN —I guess the short answer is that as long as the Opposition's policies are not in place we have some chance of bringing about a sustained drop in interest rates. I would have expected that by now the Prime Minister, the Treasurer and I, on many occasions and in many forums, would have explained satisfactorily to the Australian public or to anyone with an ounce of intelligence what is the economic situation, what are the economic causes and effects of various factors affecting this economy and what are the effects of the plans and the policies that we have in place. I would have thought that quite a few of those things would have got through to honourable members opposite. It seems to me that about the only group these matters have not got through to is Her Majesty's Opposition. The Opposition simply cannot understand that things change over time.

If one looks at the relationship between the value of the dollar and interest rates one sees quite clearly that every time the dollar moves up interest rates drop a bit. The 90-day bill rate has dropped-I have just confirmed it with the Treasurer-by about 3 per cent to 16.2 per cent. The 90-day bill rates, the long term rates, are the first rates to drop. Overdraft interest rates are sticky upwards and downwards. The last rates to move are the very long term housing rates. I can read the figures as well as the honourable gentleman opposite. I reinforce the point constantly made by the Prime Minister and the Treasurer that we take no perverted delight in having high interest rates which affect people so disadvantageously.

There is no policy alternative to high interest rates at present. They are not designed to maintain a high exchange rate. They are designed to squeeze down on imports. They are designed to squeeze down on demand. I would have thought that the mob opposite, who used to pretend to be monetarists, would have understood what monetary policy is all about. We are all about tough monetary policy. We are also applying tough fiscal policy, basically because we are responsible and because we do not believe in voodoo economics. Nor do we believe in putting forward to the people a complex of policies which would guarantee distress to hundreds of thousands of people-in other words, guaranteeing more unemployment-which was the policy mix the former Government gave to people. We are coping with difficult times. We have put in place policy settings which will lead to a drop in interest rates. We have had a terms of trade decline of 20 per cent, our revenue from external sources is down by $6 billion to $8 billion a year and we have had an effective devaluation of 37 to 38 per cent. Those things are impacting upon the economy. They are directly affecting interest rates, the cost of imports and the rate of inflation-not wages and not a lot of other ideological nonsense which the Opposition persists with because it cannot understand the facts.