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ABC News Breakfast -

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(generated from captions) More weather in half an hour.

The top story on ABC News

Breakfast - the Reserve Bank of

Australia yesterday decided to

raise official interest rates

by 25 basis points. It's the first interest rate rise

first interest rate rise since

the global financial crisis hit

last year. The move is being

Chamber of Commerce and criticised by the Australian

Industry among others. The

chamber says there's a risk the

early signs of recovery could

be set back if the rise flows

in to business credit. For

more, the Opposition's finance

spokeswoman Senator Helen

Coonan joins us now. You'll

probably agree with the chamber

there but isn't the problem for

you today that political point

scoring is a problem

scoring is a problem with the

rate rise means the economy is

going well? Not at all because obviously the economy is going

well, we know that the

emergency has passed. That also

means that the effectiveness of

the stimulus package, this huge

borrowed pumping in the economy

that the Government has gone on

with now, it's also passed,

it's peaked. Now is the time to

seriously consider winding back

the stimulus or

the stimulus or at least

deferring it in the out years.

You've said that the Government

is responsible for this

interest rate rise. Under a

interest rates be permanently Coalition Government, would

at 3%? What I think we've said

is - because this is what the

Reserve Bank Governor has said

- is that if this stimulus

continues in the economy, it

will mean that he won't be able

as he to keep interest rates as low

as he otherwise might. It

stands to reason that you

actually put money into a

contracting economy, you take

it out of an expand ing economy

and when you've got one arm,

fiscal policy, the spending

side, continuing to power on

and the other arm reining it

in, that's when you get out of

sync. He has said he is

wound back over the comfortable with how it will be

wound back over the next couple

of years. In the Senate

inquiry he alluded to the fact

that it had done its work, it

peaked and both fiscal and

monetary policy will need to be

reined in. Where he said it

would faze out, he was

comfortable with the fazing

process but he then said that

if the economy starts to heat

we're starting again up, we continue with the boom,

we're starting again with

China, the Government may have

a Plan B in the lead-up to the

Budget which would mean

deferring the 20 or 30 billion

that's still to roll out of the

stimulus, deferring it or

pulling in. He alluded to the

fact the circumstances may

require the Government to be

thinking of Budget preparations

and a Plan B. Surprisingly,

we've heard nothing from the

Government about any plan

Government about any plan to

actually exit this huge

stimulus. The Government

said when the stimulus package pointed out that the Opposition

was announced that it wouldn't

create one job and now you're

saying it's worked too well.

Isn't there a degree of

hypocrisy there? That seems to

be what Mr Swan has said but we

don't yet know whether Andra Pradeshment has completely

peaked and it's interesting

that the governor has obviously

decided that

decided that things are good

enough, conditions are good

enough even though we may not

know when unemployment has

peaked or bottomed out to put

up interest rates. I think

we've got to be careful that

we're not allowed the economy

still to be fuelled by this

huge borrowed stimulus at a

time when the Reserve Bank has

clearly said the emergency's

over. The emergency setting

should be looked at on both

sides of both monetary and

sides of both monetary and

fiscal policy. So where would

you pull money from the stils

program now? Is lot of it's going into infrastructure over

the next couple of years which

people would generally argue is

badly needed and it would be

good to see those improvements

in infrastructure so you want

that stimulus wound back. Where

would you pull money out? There's lots of opportunities

now for the Government to take

a really good look at the stimulus spending. We

stimulus spending. We know for

instance the wasted money

that's gone into the schools

package, lots and lots of

wasted money and a blow-out of

over a billion dollars, that's

one area where you can look at

whether or not the money's committed and whether or not

that can be wound back. It's been deferred after December

because of the cost blow-outs.

Also with the infrastructure

spending, now is a good

opportunity to look at the

going to do value-add, what is it actually

going to do for the economy?

You can obviously defer the spend and because

infrastructure Australia tick

adwhole lot of projects, we

don't know what ultimate

productivity benefits they're

going to have for the economy.

It's a ver good opportunity for

the Government to take a very

good look at whether this final

part of the stimulus package iseralliy necessary, whether

it's going to get the productivity benefits claim for

it. You believe some of that

infrastructure program may have it. You believe some of that

been rushed in a similar

fashion to the schools program

and there may be a wastage

there? Clearly you need to get

value for money. There needs to

be greater benefit for cost. We

know in the circumstances of

Infrastructure Australia,

having approved the projects announced in the Budget, there

are some we simply don't know

Melbourne Cup about them, why

opportunity they were ticked. There is an

opportunity to have a good look

not only at that spending but

the spending that hasn't yet

been wound out in the wasted

schools package. 20 or 30

billion, borrowed money, is

going to add to the debt and we

need to know before any of

that's spent that you're going

to get value for money and we

need to take the pressure off

increased interest rates. We

know interest rates are going

to continue to go up. To

to continue to go up. To

normal levels. The stimulus

has done its work, that's wrr

what the Reserve Bank Governor

said, so why should we enter

more debt of borrowed money in

circumstances where you

wouldn't get much bang for your

buck and continue to put

pressures on interest

rates The RBA has said it must

put the brakes on people

spending and over-reaching

themselves. Do you believe it

is up to Australians to

is up to Australians to take

this message and not reach

beyond themselves? You can't

help but feel sorry for people with mortgages and credit card

debt and other loans. It is

tough when interest rates go up

but the Reserve Bank Governor

has made it very clear that the

emergency settings can't go on

forever, they'll return to what

he calls more neutral rates,

more neutral levels, and in

those circumstances we know

that that's the way in which the Australian

the Australian economy

operates. The pulling down of

the monetary side of it had a

huge effect of course in

dealing with, together with the

stimulus and other factors,

together with the fact that

Australia was left in such a

good position at the time that

the Government took over so

there were lots of things

contributing to Australia

weathering this downturn and as

we come out these two arms of

we come out these two arms of

policy need to... E(Problem

with sound) Obviously we want

to have a discussion and have a

look at what's being brought

forward. My colleague Ian

McFarlane has been working hard

to fashion amendments we'll

discuss today. The bottom line

is we don't

is we don't want to see

Australia less well treated,

less favourably off than the

rest of the world. That going

to be a very important plank of

our principles that we look at

when we look at whether or not

these amendments get there. Senator Helen Coonan,

thank you very much for joining

us. Thank you for inviting me

on the couch. Let us know what

you're thinking about the ETS,

about the shadow Cabinet

meeting and the rate rise of course. Our email address

course. Our email address is: