Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Thursday, 26 February 1987
Page: 807


Mr HOWARD (Leader of the Opposition)(2.54) —I move:

That this House calls upon the Prime Minister to table the latest advice received by the Government from the Treasury and/or the Reserve Bank of Australia and the current forecasts of the Indicative Planning Council regarding the level of interest rates in Australia.

This issue is about the credibility of the statements by the Prime Minister (Mr Hawke) on the most sensitive economic indicator for Australian families, Australian farmers and Australian small businesses-that is, the level of interest rates. Interest rates will be the political death of the Hawke Government. Every one of those members who represent marginal seats-the honourable member for Chisholm (Ms Mayer), the honourable member for Hunter (Mr Fitzgibbon), the honourable member for Dunkley (Mr Chynoweth) and the honourable member for Eden-Monaro (Mr Snow)-knows what a hole high interest rates are now burning in the pockets of their constituents. The honourable member for Barton (Mr Punch) knows better than any the hole that those high interest rates are burning in his tissue-thin majority, because the issue of interest rates goes to the very heart of the Prime Minister's credibility.

Over the past 24 hours we have seen a quite disgraceful attempt by senior Ministers in the Government to denigrate an officer of the Department of Housing and Construction, Dr Hawkins, because he had the temerity to do a very simple thing-that is, to give some honest advice to the Government. As Dr Hawkins has been so contemptuously dismissed by the Prime Minister, the Minister for Finance (Senator Walsh) and the Minister for Education (Senator Ryan), let me tell honourable members about him. According to the Prime Minister he heads what he describes as a non-relevant economic forecasting section of the Government. Senator Walsh claims that Dr Hawkins is only a junior official of the Department, and an officer who is not in a major economic department and does not have access to joint economic forecasting group forecasts. According to Senator Ryan, he is an officer in the Department of Housing and Construction who does not have the economic data that the Department of Finance and the Department of the Treasury have, and the briefing was really based on assumptions from somebody who is not close to the management of the economy.

That is the disgracefully dismissive description of Dr Hawkins. It is the most outlandish example I have heard in months of shooting the messenger. All he did was to give some honest advice, and to give the advice that any economist worth his socks would give under the policies of the present Government-that is, there is no earthly hope that interest rates will come down in 1987. What does he get for his pains? He is rudely insulted by senior Ministers of the Government, he is gagged by his Department and he is told by our `trust me' Prime Minister that his advice is wrong, despite the fact that his advice was based upon the views of the Treasury and the Reserve Bank of Australia. The point that the Prime Minister appears to have missed is not only that the briefing paper reflected Hawkins's views but that, in turn, Hawkins's views reflected the views of the Indicative Planning Council on which the Treasury and the Reserve Bank-the authorities that advise the Government on economic matters-are both represented.

I will tell honourable members about this man who is only a junior official, whose views are irrelevant and whose views are of no account. He is the First Assistant Secretary of the Department. He earns a salary of $60,000. He has a staff of 59 people. Some irrelevance! He has a staff of 59 people and as late as 1983-listen to this; this is the whopper of all-he worked as Assistant Secretary of the Economics Division of the Department of the Prime Minister and Cabinet. He would be well briefed in the macro-economic area. He only has a doctorate of philosophy in economics from the Australian National University. Listen to this: He worked in the Reserve Bank prior to his appointment to the Department of the Prime Minister and Cabinet. He has published various articles in the macroeconomic area, including a paper to the conference on applied economic research which was praised by the likes of Fred Gruen and Michael Keating, one of the Government's departmental heads.

This is the latest in a long series of unfortunate deceptions by the Prime Minister about interest rates. It goes back to that fateful forecast that he made during 1984, a forecast that will echo in the ears of every Labor member representing a marginal seat between now and the next election. Everybody will remember that forecast. It will be written into every person's mind between now and the election. On 20 November 1984 the Prime Minister said:

Australia and Australians will during 1985 reap the interest rate rewards that are flowing from the successful policies of the past twenty months. We've ploughed the fields and sown the seeds. In the very near future, we will harvest the crop.

The struggling strangled home buyers of Australia-those people in Hurstville and Rockdale who are paying $152 a month more than they were paying when the Prime Minister robbed them blind with that promise in November 1984-may well ask when the crop will be harvested. In the rural electorates the farmers and small businesses will want to know what has happened to the small overdraft rate that has gone from 14.5 per cent when the Prime Minister made his promise to 20.5 per cent. They will want to know what has happened to the Bankcard rate that has gone from 18 per cent to 22 per cent. They will want to know what has happened to the large overdraft rate. They will want to know what has happened to every single sensitive interest rate indicator in the Australian economy. There will not be a shortage of people in the Liberal and National parties to tell the Australian people, and to tell the voters in those marginal electorates, the reason why they are paying through the neck for their interest bills. There will be no shortage of people to tell them that under the policies of this failed Government there is no hope of interest rates coming down.

The reason why Dr Hawkins spoke the truth, the reason why the Prime Minister has been caught out deceiving the Australian people about interest rates, is that the policies he has followed since he was elected in 1983 have been counterproductive to bringing down interest rates. If he had followed a different economic course, if he had not squandered the gains that were available to the Government in 1984 in rushing headlong to a premature election, he would not now be in the interest bind that will dog him for the rest of this year. I am reminded of an article written by Max Walsh on 1 September 1984 after the 1984 Budget was brought down. It was called `The beginning of the end of the Hawke Government'. The central thrust of that argument was that the Government blew it in the 1984 Budget. In 1984 it had an opportunity, because of the surge that was available from the recovery brought about by the breaking of the drought and the improvement in the international economy, to do something about the structural Budget deficit and thus get interest rates down over the medium and longer term. But instead of doing that, the Government brought down an incredibly soft and irresponsible Budget, and that Budget carried Labor into the election.

That Budget is now coming back to haunt the Government and it will bite it to political death. That Budget and the failure of the Government to do something about the structural Budget deficit has meant that this Government is now in an impossible bind. Even if it has the expenditure cutting nerve that so far it has lacked over the four years it has been in government to cut government spending in the May mini-Budget, it will be too late to bring interest rates down in 1987. Incredibly enough, the Prime Minister talks about the impact of the May mini-Budget on the level of interest rates in Australia.


Dr Theophanous —Give us something new, John.


Mr HOWARD —Well may the honourable member interject. He interjects from a position of relative safety, but I do not think the honourable member for Dunkley, the honourable member for Chisholm, or the honourable member for Barton, the honourable member for Lowe (Mr Maher) or the honourable member for St George (Mr Dubois) will be so enthusiastic about interjecting on interest rates. They know that their Prime Minister has done them dead on the issue of interest rates. They know that no matter what they do in the May mini-Budget, it will all be just a little too late. They do not enjoy the truth any more than the Prime Minister enjoys the truth that came from Dr Hawkins who wrote the memorandum tabled by Senator Ryan.

The other interesting thing about the Prime Minister's answers at Question Time was that, in effect, he was saying that if people a few days ago thought that interest rates might be staying up until next year they were all wrong because the Government has now decided to have a mini-Budget in May and because of that interest rates will come down. He was saying that the Government would be very tough and hair-shirted and would get stuck into the States and all the big spending and would get interest rates down. Interestingly enough, that is a direct repudiation of the professed strategy of the 1986 Budget. When the Treasurer (Mr Keating) brought down that Budget in August 1986, he said that its whole basis was to lay the groundwork for a reduction of interest rates during 1986-87. That strategy has been blown to smithereens over the last nine or 10 months. Now the Prime Minister is struggling to assert his credibility on this issue. As recently as 17 February on interest rates he had this to say:

We look to 1987 with a cautious optimism about the economy, including a fall in interest rates in 1987.

This is what the Treasurer had to say:

This Government has done what very few governments around the world have done-it has reduced markedly its budget deficit so as to promote a better climate for interest rates and a higher level of activity by the private sector. . .

All of that has been exposed by the candour of a public servant, a public servant the Government now wishes to disown, a public servant the Government has now gagged, a public servant who is merely reflecting the views of the Department of the Treasury, the Reserve Bank and the Indicative Planning Council for the Housing Industry on interest rates.

If my claim about the current advice coming to the Government from the Treasury and the Reserve Bank is wrong-I can assure the House that on a matter as sensitive as this the Treasury and the Reserve Bank would have reduced their advice to writing, because no self-respecting government or Prime Minister would run around the country making claims based on other than written advice-if there is no contradiction, if Dr Hawkins is completely wrong and if the Government now has advice from the Treasury and the Reserve Bank that interest rates will come down in 1987 and that the likelihood is that they will not remain high until 1988, the Prime Minister has a very simple opportunity at the end of my speech to indicate to the House that he is willing to table the advice he has received from the Treasury and the Reserve Bank. In doing that, the Prime Minister would be able to go some way towards clawing back his loss of credibility on the question of interest rates. The Prime Minister's word on interest rates is absolute mud to home buyers, small businesses and farmers.

When my speech is concluded the Prime Minister has an ample opportunity to get up in this Parliament and say that he will table those documents and put at rest any concern that the Australian public may have. But if I and the Opposition are any judge of the Prime Minister, we know that he will not do that. He will say to the Parliament and to the Australian public that they should forget about Dr Hawkins and about the fact that the Minister for Housing and Construction was approached by Senator Ryan's staff and was asked for an assurance as to whether the advice in the memorandum was still correct. They should forget that his office said to Senator Ryan's office that that advice was still correct-in other words, Stewart West said that it was okay. The Prime Minister will forget about that and say to the Australian public: `When it comes to interest rates you have to trust me, despite the fact that I have got it all wrong, that I blew it in the 1984 Budget, that I have not had the guts to cut spending, that I am relying on a high interest rate policy, that I am propping up the dollar with high interest rates and that I am sending the home buyers and farmers broke with high interest rates. Despite that and despite the laws of gravity and economic arithmetic, everything will come well and by the end of 1987 interest rates will have fallen'. That is what the Prime Minister expects the Australian public to believe. If I am any judge of the Australian public, it will not believe that; it will remember that in December 1984 the Bankcard rate was 18 per cent and it is now 22 1/2 per cent. It will remember that the savings rate was 11 1/2 per cent. I remind the Minister for Housing and Construction (Mr West) that his Government has now taken it up to 15 1/2 per cent. No wonder the average weekly take-home pay of the Australian family has fallen by $31 since March 1983. The public will remember that the prime rate has gone up by 6 per cent and the small overdraft rate has also gone up by 6 per cent. Between now and the election the Prime Minister and his colleagues will be constantly reminded of the enormous legacy that they have left upon the Australian public because of their high interest rate policies.

The great culpability of this Government is that it has deliberately followed a policy of high interest rates over the past three years. It has had options available to it since as long ago as 1984-a mini-Budget in 1985, the 1986 Budget and so on. It has had opportunities to move away from its excessive reliance on interest rates to a greater reliance on wages and fiscal policies. The Government has refused to do that and, as a consequence, it is now in a position where what the Prime Minister says about interest rates is not being believed, will not be believed and cannot be believed. What he is saying about interest rates at the moment is sheer economic nonsense.

When the Government has taken this country to a point at which it has a $100 billion overseas debt, the highest interest rates since the Great Depression, an enormous structural Budget deficit, a wages outcome that will still be higher than those of our major trading partners and a tax system which is making our industry uncompetitive, when all those factors are conspiring at the one time, for the Prime Minister to pretend for one moment that he can sustain a commitment that interest rates will come down in 1987 is sheer economic nonsense.

Because he is an honest economist who was reflecting the views of the Treasury and the Reserve Bank and not just his own views or those of his Department, Dr Hawkins wrote in that memorandum that there was no likelihood of interest rates coming down before the first half of 1988 at the very earliest. If the Prime Minister is not talking economic nonsense, if he really imagines that he can be believed on the subject of interest rates, let him table the advice he has received from the Reserve Bank and the Treasury. He will not table that advice; he will run for cover and try to smear the Opposition with generalisations instead of facing reality. The reason he will not table that advice is that that advice is not available. Because the advice that was contained in Dr Hawkins memorandum was a reflection of the view of the Reserve Bank and the Treasury, until they see the colour of the Government's expenditure cutting nerve in the May mini-Budget, there is no way on earth that they will put their names and professional competence to any written advice to the Government suggesting that interest rates will fall in 1987.


Mr Sinclair —I second the motion.