TREASURER:
Well as you know the Reserve Bank this morning increased official interest rates by a quarter of a per cent and that is likely to push up home mortgage interest rates by a quarter of a percent. On a $100,000 mortgage that would be around $20 a month meaning that home mortgage interest rates are now still four and a quarter per cent lower than they were, when the Labor Party left office and the Coalition was elected, and the savings to your average home buyer is still $350 a month as a consequence.
The Bank referred particularly to developments on the international economy. That it looks like the United States has now pulled itself out of recession, although overnight the Central Bank in the United States did not move interest rates, said that it still thought that demand in the United States was a bit uncertain. So what we can say is this, that America looks as if it has come out of recession, which is good news. That means that the international environment is a little less hostile than it was earlier on, but Australia still continues to out-perform the world by a very long margin and the good news is that our economy is growing much stronger than America, or Britain, or France, or Germany. And it is providing new job opportunities, unemployment has been falling in Australia whilst it has been rising in America, and that is the good news for the outlook.
JOURNALIST:
But the Reserve Bank has identified a couple of domestic problems, overheating in the residential market and expanding household debt. Is a one quarter of one per cent increase sufficient to curb those problems?
TREASURER:
The principal reason that the Reserve Bank referred to, and I agree with it, is that it looks as if America is going to pull out of recession. We have been through a world economy where the world's largest economy was in recession, countries in our region, like Singapore and Taiwan and Japan - Japan is still in recession, America looks like it is growing, that is good news for Australia and it is good news for the world. But the American economy is not growing anything like the strength of the Australian economy. Australia just out-performs the world on all of these measures. But the good news of recent developments is it looks as if America might be growing again which is good for world growth and it will be good ultimately for Australia.
JOURNALIST:
Treasurer, is this not the beginning of a new cycle of interest rate rises?
TREASURER:
Look, I think it would be a mistake to sit down and to say that, rather than digest today's news we will start thinking about next year's news, Paul. Today's news is that the world economy is looking stronger and as a consequence, the Reserve Bank does not see the kind of risk that it did 6 months ago...
JOURNALIST:
(Inaudible)
TREASURER:
...the corollary of that is that mortgage interest payers are now paying four and a quarter per cent less on their mortgages than they were when the Labor Party left office, that their saving is $350 a month rather than $370 a month, but it still a pretty good saving at $350 a month and I think that is good and supportive for families.
JOURNALIST:
Treasurer, is the Reserve Bank right to be concerned that households may become seriously over-extended, though, with debt?
TREASURER:
I don't think that there is evidence about over-extension in relation to debt. People have been taking advantage of low interest rates. If you have low interest rates people can afford to borrow more. That is what people do, that is one of the reasons why you lower interest rates so they can borrow more and you would not be, you would not be surprised if they responded in that particular way. I think if you actually look at the last 4 or 5 years, that Australians have been borrowing more on the back of low interest rates, but they have been doing it against rising assets.
And that has been a good thing, actually, that they have had rising assets which has given them security to borrow against.
JOURNALIST:
Treasurer, what does this do to your Budget strategy in terms of stimulating the economy or dampening it down?
TREASURER:
Well, this, the Reserve Bank's assessment is much the same as our own, that in 2001 the United States went into recession, as did France, and Germany, and Japan, and Taiwan, and Singapore. In 2002 it looks like America is pulling out of recession. In 2001 Australia's growth rate was ten times that of the G-7, it will still be far in excess of the G-7 in 2002, but the G-7 is coming back. Now, this not a bad thing, this is a good thing. It is a good thing that America is pulling itself out of recession, this is will be good for global growth, and as a consequence of that that will help our exporters, and that is a good thing.
JOURNALIST:
Does that mean there is a case for fiscal policy to be tightened as well?
TREASURER:
Well, I will talk about fiscal policy next Tuesday.
JOURNALIST:
Treasurer, what is your response to the murder of the politician in the Netherlands?
TREASURER:
Look I think political assassination, wherever it occurs, is something that is absolutely deplorable and regrettable. I am not sure that I would agree with that politician on much at all, but if you disagree with somebody the way to demonstrate that is through argument or at the ballot box. I think it is a bad day for the Netherlands, it is a bad day for Europe. Nobody who believes in democracy and the rule of law would take any joy out of that and I hope that those responsible are brought to justice and a very strong message goes around the world, particularly in the democratic countries - you do not resolve arguments that way.
Thanks.