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Thursday, 14 May 1987
Page: 3205

Mr SINCLAIR —In the light of the Treasurer's fairly bullish forecast of the outcome of his mini-Budget presented last night, can he say when housing interest rates will fall and by how much?

Mr Young —How come the National Party got the first question? Have the Liberals gone to sleep again?

Mr KEATING —They can't think of a question. In the last month or six weeks we have seen substantial falls in market interest rates, in the general structure of rates, particularly in commercial bill rates, and we saw even further falls yesterday. Last week we also saw declines in the lending rates of some housing institutions. Obviously, the general interest rate market is starting now to have an impact on the attractiveness of the instruments of the deposit taking institutions.

I am not in a position to forecast when that should happen at a sufficient rate to make a very broad change in the structure of housing interest rates. However, I can say that what the Government did last night should promote a better interest rate climate, and that the scope for further genuine falls in interest rates has been provided by the Government. As the market digests and assimilates the May statement material it will take-as it has indicated so far-an optimistic view of the economy from those points that the Government has made.

There is only one way to lower interest rates and that is the proper way: We want quality falls not falls coming off any over-runs in the money supply. The Government has been determined to maintain a firm monetary policy. I believe that what we have done in the May statement, in removing that call on $4 billion from Australian savings in the forthcoming budgetary year, will generate the kind of optimism that the markets have been expecting for some time.