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Monday, 15 June 2009
Page: 3039

Senator COONAN (2:00 PM) —My question is to the Minister representing the Treasurer, Senator Sherry. Is it not a fact that the government’s massive $315 billion debt binge, where it is borrowing $3 billion a week, has put up the cost of money for banks, thereby leading to higher interest rates?

Senator SHERRY (Assistant Treasurer) —I thank Senator Coonan for her question. I think one thing that should be learnt by all, but particularly the Liberal opposition, is that correlation is not necessarily causation. At times like this Australians have every right to expect that the banks will join with the community and the government and the RBA to do everything possible to support jobs and our economy. In fact, in the face of the most volatile market conditions in some 75 years, there have been some ups and downs in bank funding costs, and this will continue for some time—for the very obvious reason of the world financial crisis, which has impacted on the world economy in a devastating way. In fact we have had the worst economic outlook in some 75 years.

The Rudd Labor government has been upfront with the Australian people about bank funding costs. We know there has been some recovery in the banks’ net interest margins in the past six months, and therefore we expect the banks, and in particular the Commonwealth Bank, which increased its rate by one-tenth of a per cent, to play their part in supporting the Australian economy and Australian jobs during this global recession. Australians have every right to be furious at the selfish attitude of the Commonwealth Bank, which is hindering the efforts of the government, the Reserve Bank and the community to stimulate the economy during this global recession. When people see banks like the Commonwealth Bank reporting very healthy profits, they rightly find it hard to understand why rises are necessary and why the banks cannot afford to leave rates where they are. (Time expired)

Senator COONAN —Mr President, I have a supplementary question. We have heard the government’s excuses and feigned outrage over the rate rise, even though it is the government’s fault. What is the government actually going to do to stop these rate rises?

Senator SHERRY (Assistant Treasurer) —As I indicated in my initial comments, correlation is not causation. What we have from Senator Coonan and Liberal members opposite is the usual dishonest scare campaign, which has absolutely no basis in fact whatsoever. Australia’s borrowings are very low by international standards and represent a tiny fraction of global capital markets. So you cannot relate it to the increase of 0.1 per cent by the Commonwealth Bank. As I said earlier, correlation is not causation. I notice the member for North Sydney’s comments on borrowings. If he thinks these increases have an impact, with a background of borrowings of tens of trillions of dollars, his economics are even sloppier than I thought.

Senator COONAN —Mr President, I have a further supplementary question. Is it not true that the recent interest rate rises were just the first rise in what will be many interest rate rises forced upon all Australians by Labor’s massive $315 billion debt binge, and how much in total will Australian taxpayers now have to pay in interest from now until 2022 to pay off the government’s massive $315 billion debt in addition to the recent interest rate hit on Australian household mortgages?

Senator SHERRY (Assistant Treasurer) —The hypocrisy of the Liberal-National Party is breathtaking. Let me remind the chamber what Mr Turnbull said when interest rates went up by 25 basis points. When interest rates rose by 25 basis points in August 2006, this is what Mr Turnbull, the now irresponsible Leader of the Opposition, said:

I think the interest rate hike has been over-dramatised.

That is what the now opposition leader, Mr Turnbull, said in response to a 0.25 per cent increase in interest rates. As I have said on a number of occasions through you, Mr President, to Senator Coonan, correlation is not causation. What we do know is that borrowing costs are determined by global capital markets as well as movements in short-term interest rates as set out by the RBA. (Time expired)