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Thursday, 3 May 1973
Page: 1649

Mr SNEDDEN (BRUCE, VICTORIA) - I ask the Treasurer: At a time when there is excess liquidity in the economy, what is the purpose of increased interest rates? What action has the Treasurer taken to ensure that Commonwealth bond interest rates are maintained at as low a level as possible in order to serve his own avowed policy of minimum interest rates rates? Has the Reserve Bank in its operations allowed the interest rate to rise at the long end of bond rate by almost one-half per cent? Has the Treasury, and the Treasurer, supported this rise in interest rates? If the Treasurer has supported it, when did he take the decision to allow the interest rates to increase?

Mr CREAN - 1 must say that I find gratifying on the part of the Opposition, as expressed through its leader, concern now about both inflation and interest rates - a concern which to say the least there was very little evidence of in the last 3 years of office of the previous Government.

Mr Malcolm Fraser - The Australian Labor Party is supposed to be the low interest rate party, yet it intends to ir.crease interest rates.

Mr CREAN - I was asked a question but I seem to be getting the answers from the other side of the House. If honourable members opposite will be quiet I will endeavour to reply to the question. I say categorically that it is better for the community as a whole if interest rates are lower rather than higher. More people benefit because most are borrowers whereas the lenders tend to be a more select group. Nevertheless, one is confronted with an economy with a great deal of existing institutional and financial arrangements.

Mr Snedden - What do you mean by 'existing arrangements'?

Mr CREAN - The Leader of the Opposition should know what I mean but if he wants the information specifically, let me tell him that there are bodies in existence such as life insurance, companies and banks. There are other bodies in existence but nobody knows quite whether they are banks or something else. They are sometimes called hire purchase companies but now are more respectably called financial companies. There is another curious group, of whose movements we know very little in Australia, called merchant banks. All of them in one way or another are collectors of funds and disbursers of funds. They compete with each other and it is my responsibility as Treasurer, and with the Treasury and, if you like, the Reserve Bank of Australia also to see that there is a proper balance of the available sources of credit. There are some people, of course, who think that there is no limit to the ability to create, credit, but if we create too much there are unfortunate effects on the money claims that are already in existence.

My task as Treasurer is to be able to divert more money into the public stream of spending and less into the private; in other words, to keep the proper balance. If nothing is done about interest rates outside the Commonwealth bond area it is very difficult in isolation to hold the bond rate at either the long or the short end. Sometimes - I am sure that former Ministers on the Opposition front bench and the Leader of the Opposition in particular, as a former Treasurer, would agree with me - one has to take decisions which one does not like to take. To some, extent that situation has been forced upon me in relation to the short term end of the market. I am no great lover of what is called the short term money market. I think it gives power and a great deal of glory to a few at the expense of the financial structure generally. However, that is a situation that I have inherited. I have indicated already that I believe that if we put controls for social purposes upon banks and insurance companies there is also a case for putting controls on other areas. If I find that I cannot hold the situation as I want to hold it by what are called the monetary forces operating in what is supposed to be a free market, though I think it is anything but free, I will have to take other courses, including perhaps direct measures, over some of those areas outside the ambit of credit control. I can assure the House that if I have to do it, I Will do it.

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