Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Transcript of press conference: Parliament House, Canberra: 4 November 2008: RBA interest rate decision; global financial crisis; US elections; public holiday in Canberra.



Download PDFDownload PDF

PRESS CONFERENCE

PARLIAMENT HOUSE

CANBERRA

4 NOVEMBER 2008

SUBJECTS: RBA Interest Rate Decision; Global Financial Crisis; US Elections; Public Holiday in Canberra

TREASURER:

Thank you for coming today. I know it's Cup day so I'll be as brief as I possibly can. But it's very important, I think, to acknowledge the significance of this Reserve Bank decision today.

The Rudd Government does join with business and families in welcoming this 75 basis point rate cut today by the Reserve Bank. Rates have now come down 200 basis points over the last two months - 200 basis points over two months.

Now for families, when this month's rate cut is passed on, it saves around $150 a month for someone with a $300,000 mortgage. Now, in total the rate cut since September will deliver around $400 in relief per month for someone with a $300,000 mortgage.

Now, this is the additional rate relief Australian families and businesses need in the face of the global financial crisis. It will strengthen our economy at a vital time. So, it's vital rate relief to Australian families and Australian businesses given the significance of the global

financial crisis.

Now, this is on top of the Government's Economic Security Strategy announced last month. That $10.4 billion Economic Security Strategy ensures that fiscal policy and monetary policy are heading in the same direction.

So, what we can see today is that all arms of policy - fiscal policy and monetary policy - are working in tandem in the face of the global financial crisis, which is referred to extensively by the Reserve Bank today in their statement.

So, Australians can be assured that the Government and the Reserve Bank are taking decisive action to protect families and businesses from the global financial crisis.

And you can see this in terms of what is going on around the world. The US, for example, had negative growth last quarter. The world's seven largest developed economies are now experiencing negative growth during this year. And as I said before, the statement from the Reserve Bank today underscores the extent to which that global crisis is impacting now on this country. We are certainly not immune.

Transcript of 4/11/2008

Page 1 of 4 Transcript - RBA Interest Rate Decision; Global Financial Crisis; US Elections; Publi...

So, we do welcome this relief for families. We welcome this relief for business. It's needed, and what it now shows is that the Reserve Bank and the Government are working in tandem to strengthen our economy in the face of the global financial crisis.

Over to you.

JOURNALIST:

What does a cut of this size say about the state of the Australian economy?

TREASURER:

I think you should have a close look at the Reserve Bank statement, because the Reserve Bank statement says that recently, international circumstances deteriorated, that growth prospects internationally deteriorated. And of course as you know when I returned from the United States and we announced the Economic Security package, I referred then to the fact that last month the face of the global financial crisis had changed, and in fact, it turned ugly. And you can date that from September 15 last month. That was the date that Lehman Brothers fell over. And that heralded a new period in the global financial crisis. And that is referred to, I think extensively, in the commentary from the Reserve Bank today.

JOURNALIST:

Treasurer, most economists were predicting a 0.5 per cent. It's obviously gone 25 points above that. Does that mean that the Reserve Bank or the Government indeed it's worse than what…

TREASURER:

What it means is that both the Reserve Bank and the Government are absolutely determined to strengthen our economy in the face of changing international conditions. That's what it shows. We now have fiscal policy and monetary policy working in tandem.

I've seen some commentary, for example, in the papers over the last couple of days that somehow the Reserve Bank may not have cut by as much as some expected because of the Government's fiscal strategy and our Economic Security package - our $10.4 billion Economic Security package. This cut today shows that both the Reserve Bank and the Government are taking the vital action to strengthen our economy in the face of changing global economic conditions. That's what it shows.t have cut by as much as some expected because of the Government'e of days that somehow the Reserve Bank ditions. Taht'he Government are absolutely determined to strengthen our economy in teh han wh

JOURNALIST:

Given the ever worsening conditions, Mr Swan, aren't you being a bit unrealistic in still maintaining, as you have been, that Australia can absolutely defy the trend and remain in positive growth?

TREASURER:

No, I don't believe I'm being unrealistic at all. I do expect to see positive growth. And when the Mid-Year Economic and Fiscal Outlook is published you will see the Government's forecast, and that will be published soon. The point I'm trying to make, Michelle, and I keep making it, is we're not immune from what's happening internationally. And what's happening internationally has changed dramatically in recent times. But if there was any country in the world that you wanted to be in in these circumstances, it is of course

Page 2 of 4 Transcript - RBA Interest Rate Decision; Global Financial Crisis; US Elections; Publi...

Australia. We do have some underlying strengths but we are being buffeted significantly by these changed circumstances. That is recognised today by the Reserve Bank in their decision. The fact that monetary policy has eased by something like 200 basis points in two months and the fact that the Government has put forward decisively an Economic Security package to strengthen growth. These two arms of policy - fiscal policy and monetary policy - are working in tandem to strengthen the economy.

JOURNALIST:

Treasurer, isn't it likely that most mortgage holders simply won't change their repayment schemes, therefore they've made savings over the last three weeks but money isn't going into the economy?

TREASURER:

Malcolm, that's a matter for individuals. But I think this relief will be welcomed by many households out there, particularly in Sydney where many people are carrying high levels of debt, [than] elsewhere in the country because of house prices historically. How they chose to react to that is entirely a matter for them. But we do know that the impact of 10 interest rate rises in a row under the previous government, on top of that the oil price spike and high inflation, has put a lot of households under pressure. This will deliver relief to those households and certainly our Economic Security package is targeted at delivering additional disposable income to many people who need it because they're doing it tough.

JOURNALIST:

Treasurer, one of the Reserve Bank members, Warwick McKibbin, has made some comments yesterday about the emissions trading scheme. First of all, he says that it should be delayed until 2011 at the earliest. And secondly, that the most likely outcome at next year's United Nations meeting will be that there isn't an international agreement. The major (inaudible) will be excluded, and for that reason, Treasury should be modelling that scenario which he regards as the most likely outcome.

TREASURER:

First of all, they're not comments that have been made in his role as being a member of the Reserve Bank board. I make that point. And secondly, he must have a crystal ball because if he knows the outcome of international negotiations. We, in our modelling, have factored in the fact that there will be various outcomes in international negotiations and it is very much part and parcel of our modelling. Over and above that, I've got nothing more to say.

JOURNALIST:

Have you got any thoughts on the US election?

TREASURER:

I don't seek to take sides here. There are two fine candidates. I think the alliance will be in good hands with either President Obama or President McCain.

JOURNALIST:

Mr Swan, do you think it's appropriate the national capital's on holiday today on a Tuesday, which just happens to match the Melbourne Cup?

TREASURER:

Page 3 of 4 Transcript - RBA Interest Rate Decision; Global Financial Crisis; US Elections; Publi...

That's entirely a matter for the national capital.

JOURNALIST:

But federal departments are all on holiday today.

TREASURER:

Many in my department are working today so I can only answer for them. There's a lot of them at work, let me assure you.

JOURNALIST:

Treasurer, is 0.75 per cent beyond the capacity of our banks to pass on in full?

TREASURER:

I want to see them pass this on in full as rapidly as possible. It is the case that funding conditions are still volatile. We did see the full amount passed on of the 100 basis point cut last time. It took a bit longer but it came through. The first 25 basis point cut came through almost straight away - three or four days. I would like to see this passed on as rapidly as is possible.

JOURNALIST:

A number of the business packages offered by banks have lower rate cuts than, say, mortgage packages. What do you say to the banks who are not passing on the rate cuts…

TREASURER:

Some banks are passing them on and some are not. I say, as I say to business or I say to depositors, shop around. We want to see a competitive market out there, and some in the business banking sector are offering better rates than others. And I say just shop around.

Page 4 of 4 Transcript - RBA Interest Rate Decision; Global Financial Crisis; US Elections; Publi...