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Tuesday, 13 September 1983
Page: 650


Mrs KELLY —I ask the Prime Minister whether his attention has been drawn to statements such as this: 'A lower Budget deficit is needed in order to reduce the enormous pressure on interest rates that will inevitably develop because of the extraordinary and damaging level of the public sector borrowing requirement this financial year'. In view of the recently announced cuts in housing interest rates, are such statements unfounded?


Mr HAWKE —Of course, the Government and, I hope, members of the Opposition-they are not beyond redemption-certainly welcome the recent announcement of reduced interest rates. The major banks, starting with the Westpac Banking Corporation, have announced a reduction of half a percentage point in home loan interest rates. A number of building societies, as we know from today's Press, have already followed suit. As all honourable members who follow the markets will appreciate, this announcement by the banks and building societies follows a downward trend in short term and long term rates. We believe that this reduction , coming so soon after the Budget, is a strong vote of confidence in the Government's economic strategy and in its economic management. We do not attempt , of course, to claim all credit for what has happened in this respect. The Government's competent economic management has in part been responsible, but of course--


Mr Burr —What did the Australian say?


Mr HAWKE —I will show in a minute that if there had been rises in interest rates the Opposition would have claimed they were the responsibility of the Government . It cannot have it both ways. Of course, there have been other factors, including the falls in United States interest rates and a very adequate capital inflow. The relevance of the Budget in this should not be overlooked. As the Treasurer and other spokesmen for the Government have made clear, the Budget was very deliberately framed to ensure that we did not have an adverse impact upon the movement in interest rates. It was framed in a situation in which we knew that there were not excessive claims on the market from the private sector, which is still depressed as a result of the now Opposition's economic policies. We framed it at a level of less than $8.5 billion so as not to impose excessive pressure on interest rates.

Under the guidance of the Treasurer, the Government has engaged in responsible deficit funding. As you would know, Mr Speaker, in this financial year, 1983-84, there have been two bond tenders which have raised $2 1/2 billion, so instilling confidence in the market and easing interest rate pressures. Of course, we on this side of the House hope that moderation in inflation will lead to further falls in interest rates, but that depends very substantially on other factors as well in the market.

It is very significant that these reductions in interest rates expose the total lack of credibility of the Opposition in these matters. Let me remind the House of the facts in this regard. On 31 August the Deputy Leader of the Opposition said:

A lower Budget deficit is needed in order to reduce the enormous pressure on interest rates that will inevitably develop because of the extraordinary and damaging level of the public sector borrowing requirement this financial year.

He said that on 31 August, and two weeks later interest rates fell. This pathetic Opposition has been predicting interest rate rises ad nauseam. Let me remind the House of some of its statements. On 19 May the Deputy Leader of the Opposition said:

Interest rates will rise.

On 20 June he said:

Australia will face higher interest rates unless the Prime Minister and the Treasurer take a strong stand against excessive State borrowings at next week's Premiers Conference.

The lack of credibility of the Deputy Leader of the Opposition is exceeded only by that of the Leader of the Opposition. This is what he said on the day after the Budget was presented, 24 August:

Interest rates are going to go up.

On 27 August he made this remarkable statement:

The Government admits that even if the prices and incomes accord does work, the budget will still mean . . . higher interest rates for home buyers . . .

That is what the Leader of the Opposition said on 27 August. On the next day, 28 August, this is what the Leader of the Opposition had to say:

The Government pursues policies of high interest rates which can only further hit the competitiveness of small and large businesses.

This country is being exposed to this pathetic situation in which the ignorance of the Leader of the Opposition in regard to matters economic is matched only by the way in which he seeks to see inflicted upon the people of this country further burdens out of which he hopes to get some cheap political advantage. It is a pity that the Leader of the Opposition and the Opposition's economic spokesmen did not have the wit or the intelligence to understand that the thrust of this Budget is not to increase interest rates but to reduce them.