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Wednesday, 20 February 1980
Page: 101

Mr WILLIS (GELLIBRAND, VICTORIA) - I address my question to the Treasurer. I refer him to an answer he gave yesterday in which he said: we intend to maintain the firmest possible stance on our monetary policy objectives. We do not intend to allow anything to subvert them.

As the money supply was growing at a rate of 12 per cent at the end of December and as trading bank deposits, which account for more than half the money supply, were growing by 15 per cent at the end of January, what steps does the Government intend to take to prevent the subversion of its monetary policy objective of keeping the rate of growth of money supply this year to 10 per cent? Will the Treasurer assure the House that any such steps will not result in further increases in interest rates?

Mr HOWARD (BENNELONG, NEW SOUTH WALES) (Treasurer) -As to the first part of the honourable gentleman's question, I take the opportunity of confirming that the monetary policy objective to which I referred yesterday was in fact the monetary outcome of about 10 per cent that was referred to in the Budget Speech in August of last year. The honourable gentleman and others who study this matter will know that there is a lot of hazard in taking the figures for part of the year and trying to draw hasty conclusions about what they mean in terms of a full year outcome. It goes without saying that a large influx of overseas capital in one month is going to inflate the money supply figures for a period of the year that includes that month. It equally goes without saying that more modest levels of private sector foreign exchange transactions between now and the end of the year are also going to have an effect on the money supply. As to the second part of the question, I do not intend to give the House any assurances about the future level of interest rates.

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