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Nelson takes an interest in rates -

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ELEANOR HALL: But we go first to Canberra where The Federal Opposition leader, Brendan Nelson, has
gone out on a political limb today by putting a number on how far he thinks the Reserve Bank should
cut interest rates.

It's widely anticipated that the Reserve Bank board will cut the official rates when it meets
tomorrow.

But in a move that even he admits is unusual, Dr Nelson is calling for the bank to cut rates by
half of one per cent.

As well as providing some free advice to the Reserve board, he's also indicated that the Opposition
will negotiate with the Government over its emissions trading scheme.

In Canberra chief political correspondent, Lyndal Curtis reports.

LYNDAL CURTIS: Ahead of the Reserve Bank meeting, it's standard operating procedure for the
Treasurer Wayne Swan.

WAYNE SWAN: Well, I don't interfere with Reserve Bank decisions nor do I speculate about them.

LYNDAL CURTIS: But Dr Nelson is willing to do more than speculate.

BRENDAN NELSON: All of the indicators from our perspective as such that there is every
justification for the bank, if it chooses to, to cut those rates by half a percentage point.

LYNDAL CURTIS: He says it's not a call he'd make as prime minister and acknowledges it's an unusual
move for someone in his position.

BRENDAN NELSON: Somebody has to say it and I think we are in an environment where the Reserve could
easily justify a 50 basis point cut.

LYNDAL CURTIS: Both Dr Nelson and Mr Swan are calling for the banks to pass on any rate cut in
full. And on Sydney radio 2UE the Treasurer has continuing to warn the banks they'll have no excuse
for not passing on a cut in rates and he'll act if they don't.

WAYNE SWAN: Economic policy has twin pillars: a fiscal policy and monetary policy. And if the banks
are challenging the authority of the Reserve Bank and the authority of the Government, that is a
challenge to the authority of monetary policy; and I also think what it does is undermine public
confidence in the banks themselves.

We'll wait and see what they do. I've got all options on the table. I've asked the Treasury to have
a good look at all competitive aspects of the market and we'll just see how it goes in the next
month or so.

LYNDAL CURTIS: The Nationals leader Warren Truss says if rates do fall, the Government can take no
comfort.

WARREN TRUSS: Tomorrow's interest rate reduction is not a sign of a healthy Australian economy. It
is a sign of Labor's mismanagement.

LYNDAL CURTIS: But the Treasurer says the Government gave the Reserve Bank room to move through its
budget and he's continuing to pressure the Opposition over its planned vote against some budget
measures.

WAYNE SWAN: And it is just the height of hypocrisy for someone like Brendan Nelson to be blowing a
hole in the surplus and at the same time be calling on the Reserve Bank to cut interest rates. He
will cripple the capacity of this Government over time to take pressure off inflation and create
room to move for the Reserve Bank if he continues to try and blow holes in the surplus.

LYNDAL CURTIS: One of those measures is the increased tax on luxury cars. It will begin to be
debated in the Senate today with a vote expected later in the week.

The Opposition is voting no and the minor parties and Independent Senator Nick Xenophon have called
for changes to exclude fuel efficient cars from the tax rise.

Senator Xenophon says he's talking to the Government about a range of issues although not yet to
the Prime Minister.

NICK XENOPHON: Oh, look I am in constant contact with the Government. I think we are all sorting
our way through this and the new arithmetic in the Senate. So I am sure that we will get there
sooner rather than later.

LYNDAL CURTIS: Have you sat down with Kevin Rudd yet and had a chat?

NICK XENOPHON: Oh, look I haven't met with the Prime Minister. I am sure that will happen in due
season.

LYNDAL CURTIS: Have you met the Prime Minister?

NICK XENOPHON: No.

LYNDAL CURTIS: While the Opposition is happy to send the Government into the arms of the cross
benches on budget matters, Dr Nelson has indicated that won't be the case with emissions trading
when the Government's carbon pollution reduction scheme comes before the Parliament.

BRENDAN NELSON: But I want you to know that we are not and I will not allow this country to be held
hostage to extreme elements in the Parliament nor indeed to, on occasion, extreme elements within
the Government itself.

LYNDAL CURTIS: He says the Coalition will negotiate with the Government.

BRENDAN NELSON: I want to say to you that I have said to my colleagues and I say this to you, it is
about putting Australia first. It is about Australia's national economic and environmental
interests. It is not about political opportunism and the things of which I and others are
frequently accused. It is making sure we get this right for our country and that is the overall
objective and the prism through which decisions will be made.

Next year when this comes into the Parliament and it comes into the Senate, I want you to know that
we will be negotiating with the Government to see that we get the best outcome for Australia.

LYNDAL CURTIS: The Government wants the scheme to start in 2010. The Coalition's position is that
it shouldn't start before 2011 and probably not until 2012 but Dr Nelson is expecting the
difference between the two to be split and the scheme to probably start in 2011

BRENDAN NELSON: In the context of looking at the Government as distinct from ourselves, I think it
is more likely to be 2011 but it could be as late, as I said today, as 2012.

And I think as Australians become increasingly introduced to the economics of this emissions
trading scheme and the complexity of it actually starts to dawn on the Government then I think it
is likely that we will get to 2011 but I would think the Government would be most reluctant to go
any later than that.

LYNDAL CURTIS: The Government's climate change advisor Professor Ross Garnaut will hand down his
next instalment on the details of the scheme on Friday.

The legislation is due before Parliament in March next year and then the negotiations will begin in
earnest.

ELEANOR HALL: That is chief political correspondent Lyndal Curtis with that report.