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Govt welcomes Reserve Bank hold on interest rates.

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Tuesday 1 April 2008

Govt welcomes Reserve Bank hold on interest rates


MARK COLVIN: People with mortgages, business borrowers, and the Government are all breathing a sigh of relief after th is afternoon's Reserve Bank announcement that interest rates were staying on hold at 7.25 per cent.  


The bank now believes - for the moment, at least - that its policies are having the desired impact.  


In fact, the RBA's Governor, Glenn Stevens, says that the official rate rises, coupled with the retail bank's own independent hikes, have led to a substantial tightening in financial conditions since the middle of last year. 


The Treasurer won't say whether the Reserve's has now done enough to bring inflation under control, and he's determined to keep up the belt-tightening when he delivers the Federal Budget in six weeks time. 


From Canberra, Dana Robertson reports.  


DANA ROBERTSON: For the first time in three months, interest rates are on hold, and the Treasurer's relief is palpable. 


WAYNE SWAN: Today's Reserve decision is a welcome reprieve for working families who've been doing it tough after eight official rate rises in a row. 


DANA ROBERTSON: In the Reserve Bank's justification of its decision, the Governor Glenn Stevens says while inflation is likely to remain relatively high, there's some tentative evidence that growth in domestic demand is moderating, that consumer sentiment has softened, and demand for credit has slowed. 


He's also noted that the banks' own mortgage rate hikes - independent of the Reserve - have played a part in the tightening of financial conditions. 


Wayne Swan's again urged lenders to think of the impact on families before lifting their rates. 


WAYNE SWAN: Australian families are under tremendous financial pressure, the banks must take that into account when they make their decisions. 


DANA ROBERTSON: But he won't say whether the Reserve Bank's job is done. 


JOURNALIST: Are the rate rises working? Can you say that they seem to be working now? 


WAYNE SWAN: Well that's a matter for the Reserve Bank; they've made their observations today. 


DANA ROBERSTON: In fact, the usually loquacious Treasurer was particularly tight-lipped on a day that brought undoubtedly good political news.  


This afternoon, he faced the media for a little under three minutes and reiterated that the fight against inflation is the Government's number one priority as it frames the upcoming Budget. 


WAYNE SWAN: Certainly it's a good sign that the Reserve took the decision they took today, but these are matters for the independent Reserve Bank. 


The Government's job is to put maximum downward pressure on inflation, and therefore maximum downward pressure on interest rates. 


You know, over recent years, all the weight has been on monetary policy. The government has not been playing its role. We are determined, we are determined to fight inflation. 


DANA ROBERTSON: And the real-world impact of rising interest rates was brought home today to a Senate committee investigating that's housing affordability.  


The Treasury's Phil Garton gave evidence that that home repossessions have dramatically risen in the past few years. 


It's a period that's coincided with more regular rate increases from the Reserve Bank. 


PHIL GARTON: 10,000 roughly, is the figure for 2007 across all states. 


MALE SPEAKER: And how does that compare with the previous years? 


PHIL GARTON: I think roughly, it's slightly more than doubled over three years. 


MALE SPEAKER: Slightly more than doubled over three years? 


PHIL GARTON: Three or four years. 


DANA ROBERTSON: And the Department of Housing told the committee that the cost of paying off a home is beyond the reach of many. 


But the Master Builders Association (MBA) wants the debate on the cost of housing to extend well beyond just interest rates. 


The MBA's Wilhelm Harnisch. 


WILLHELM HARNISCH: There are already concerns being expressed by builders in terms of their capacity to secure labour to meet future housing demand. 


DANA ROBERTSON: That's one area where the Government's promising action. 


Wearing the obligatory Day-Glo vest, Julia Gillard visited a Canberra building site this morning to unveil the Government's latest move to tackle the shortage of skilled workers. 


JULIA GILLARD: Employers are crying out for labour. 


DANA ROBERTSON: She's announced the first 20,000 of a promised 450,000 training places across a range of industries, but with a focus on construction and mining. 


JULIA GILLARD: We know employers are looking for people with these qualifications, because these qualifications were selected from a survey of employers who are advertising and have job vacancies. 


So we've gone to the horse's mouth, we've said to employers who are looking for workers, "Who are you looking for?", and this is the list of qualifications and skills that they need, that they have fed back to us. 


DANA ROBERSTON: The first tranche of training spots are set aside for people who are unemployed. 


But Ms Gillard can't say just when the first of them will be ready to start work. 


She's equally tight lipped about another battlefield in the Government's war against inflation: the forthcoming Budget. 


JULIA GILLARD: We want to deal with inflation; having a fiscally-disciplined Budget is part of our plan to deal with inflation. 


DANA ROBERTSON: The Expenditure Review Committee has been meeting almost daily to pare back the Budget spending. 


But Wayne Swan's mantra about what to expect on 13th May remains unchanged. 


WAYNE SWAN: It is going to be a tough Budget, but it's going to a Budget which will be fair, and it will deliver for working families, but there will be tough decisions. 


I'm not going to outline those decisions today, because we are still going through our Budget process, but on Budget night, the answer will be there for everybody to see. 


DANA ROBERTSON: Answers the Government will be hoping are right. 


MARK COLVIN: Dana Robertson.