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Release of Consumer Price Index for December quarter.

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Wed, 28th January 2009


Shadow Treasurer Deputy Leader of the Opposition

The December quarter Consumer Price Index fell by 0.3 per cent with annual inflation now at 3.7%. Although inflation is higher than the Reserve Bank target range, a similar result for the March quarter would result in inflation falling within the target range.

Today’s CPI figures again confirm that the Government was wrong to ignore the warnings of a global slowdown and talk up an ‘inflation monster’ in 2008. The Government’s rhetoric placed pressure on the Reserve Bank to put up interest rates and encouraged Australians to fix their interest rates.

Today thousands of Australians are not receiving the benefit of recent interest rate reductions and are still making mortgage and loan repayments at higher rates which were fixed in response to the Government’s panic over ‘runaway’ inflation.

Given that the Government has provided the banks a taxpayer backed guarantee on deposits and funding, it should seek from the banks an assurance that current and future cuts to the official interest rate will be passed on to businesses and individuals.

Australia’s banks have so far failed to pass on in full the recent cuts to official interest rates. Cuts in the official rates are designed to stimulate the economy, not to protect the balance sheets of banks and should be passed on to business and individuals to protect jobs and support consumer demand.

Any future cuts to the official interest rate should be passed on in full to businesses and individuals with lower interest rates to apply to business loans, credit cards and mortgages.

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