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Transcript of doorstop interview: State Parliament House, Melbourne: 21 June 1994: Interest rates, Senator Gareth Evans



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Deputy Leader of the Opposition

21 June 1994

TRANSCRIPT OF DOORSTOP INTERVIEW

Tuesday 21 June 1994

PETER COSTELLO HP Shadow Treasurer

at 12.40 pm

State Parliament House, Melbourne

SUBJECTS: INTEREST RATES, SENATOR GARETH EVANS

E & Ο E PROOF COPY ONLY

COSTELLO:

Now look y o u ’re seeing in relation to the bond markets that there’s an expectation that interest rates will rise. Serious economic analysts have been saying this for some time. It's the point we made in relation to the Government Budget - that as a result of the Budget interest rates will rise higher, sooner than they needed to.

There's no point in Gareth Evans getting up in the Senate this morning and blaming the Opposition for all this. This is a

consequence of Government policy, it is a consequence of the Budget that they brought in. He might try and put his head in the sand like an ostrich and ignore what's going on, but the bond markets and the inflationary expectations and the amount of money that's flowing into the housing sector are all pointing to the

same result - that interest rates will rise.

JOURNALIST:

Do you think that the bond markets are behaving irrationally, though?

COSTELLO:

Oh, look, the bond markets are buying and selling money, and they're making investment decisions on behalf of people - they can't afford to be wrong, and they're taking a position based on expectations, they’re taking decisions based on the Government's economic policy, they're taking decisions based on what the Reserve Bank itself has been saying. They can't afford to be

irresponsible - they're dealing with other people's money. And the verdict that they're delivering is that as a result of

inflationary expectations and lending into the housing sector and the Government's fiscal performance# interest rates will rise.

Parliament House, Canberra, A .C .T . 2600

C O M M O N W E A L T H PARLIAMENTARY LIBRARY M IC A H

JOURNALIST:

Mr Costello, how soon do you expect home loan interest rates specifically to rise?

COSTELLO:

Well look, if interest rates are rising and if the Reserve Bank is forced to intervene, you would expect home mortgage rates to follow suit and there would be a general expectation that sooner or later, they'll rise. And when interest rates rise, that's going to dampen business investment and it's going to make life more difficult for average home buyers, and that is the

consequence of the Government'a economic strategy.

JOURNALIST:

Some of the market analysts are suggesting maybe around September we may see a rise. Do you go along with that?

COSTELLO:

Well, some of the market analysts are saying that there should have been a rise already. I t ’s now no longer a question of if, it's a question of when, and that is the consequence of the

Government's economic strategy - it has made an interest rate rise inevitable - it will come sooner and it will go higher as a result of the Government's economic strategy.

JOURNALIST:

How would you describe the way the Government (inaudible)....

COSTELLO:

Oh, look, Senator Evans is lashing out, trying to blame other people for the consequences of the Government's own economic policy. But that won't do him any good - that is irrationality in itself. To lash out in that kind of way and accuse others of

irrationality is essentially to engage in (inaudible) in pointing the finger at others. .

As a consequence of the Government's economic strategy, interest rates will rise higher and sooner, and there's a general

expectation out there in the markets at the moment that that will come to fruition.

JOURNALIST:

How high could home loan interest rates go?

COSTELLO:

Well, I'm not getting into the business of predicting or

announcing dates, but I can make this point, that they will go higher sooner, as a result of the Government's economic strategy.

ψ ψ JOURNALIST:So, prospective home buyers .... (inaudible)COSTELLO:' Let me make this point in relation to prospective home buyers,that the Reserve Bank Governor himself was warning home buyers to take into account the prospect of rising interest rates - he said, factor it into your decision. That was a clear sign to home buyers that interest rates are on the move, and they better start cushioning themselves for that. Now that was the statement of the Reserve Bank Governor, and all of the changes since then have merely confirmed that that is the direction that interest rates are heading.ENDS