Portfolio Media Releases

RATE RISE THE PRICE OF RUDD’S RECKLESS SPENDING

6th October 2009

RATE RISE THE PRICE OF RUDD’S RECKLESS SPENDING

6 October 2009

Today Australians have received the first of many bills to come as a result of the Rudd government’s reckless spending. 

The Reserve Bank’s decision to lift the cash rate to 3.25% was ahead of market expectations. 

It is reported that Australia is now the first country in the G20 to lift its official cash rate.

This increase will cause pain for all Australians, particularly those with a mortgage or a credit card.  It will cause pain for all small business owners with an overdraft or small business loan.  It will cause immense pain for Australian exporters, particularly those in the tourism industry who are already struggling.

Kevin Rudd and Wayne Swan’s refusal to pull back on their reckless spending is directly to blame for today’s decision.

The RBA’s statement has also blown the lid off the Rudd government’s doom and gloom rhetoric.  The RBA has painted an upbeat picture of the Australian economy and global economic prospects:

“With growth likely to be close to trend over the year ahead, inflation close to target and the risk of serious economic contraction in Australia now having passed, the Board’s view is that it is now prudent to begin gradually lessening the stimulus provided by monetary policy.”

This is completely at odds with the Rudd government’s constant cries that “we are not out of the woods yet”.

Monetary policy and fiscal policy are now working in opposite directions.

Fiscal policy remains unchanged from the big spending level set at the last Budget (2009-10 28.6 per cent of GDP, 2010-11 28 per cent of GDP).  Monetary policy is now easing back.

Many Australians will feel the adverse impact of this interest rate increase.

Homeowners will see the increased costs flow through quickly in their mortgages. For a $400,000 home loan this is $1000 a year after tax.  The $900 stimulus cheques have been snatched back, with interest.

More than 2 million small business owners in Australia - who never enjoyed the full benefit of the reduction in the cash rate – will now bear the full pain of this and further rate rises.

Rising interest rates will put upward pressure on the Australian dollar.  This will be a slap in the face to Australian exporters, some of whom are already struggling from reduced demand for goods and services.

Kevin Rudd and Wayne Swan consistently blamed the Howard Government for interest rates rises.

Wayne Swan and the Rudd government must now accept responsibility for today’s decision and any rate rises in the future.

This is just the beginning of the price Australians will pay for the Rudd government’s reckless spending.

-end-

SWAN’S SLIPPERY SPIN

“If interest rates are to go up—and that will be regrettable—the responsibility will lie with ministers such as the minister sitting opposite [Hockey].”

Hansard, 16/02/2005, p. 120

“But if the government pretend that interest rates are low then they do not have to admit that it is their policies that are putting pressure on the rates. What is putting pressure on the rates" What is partially responsible for this" It is the big spending, high taxing government.”

Hansard, 09/03/2005, p. 85

“We’ve got upward pressure on interest rates, driven by Federal Government policy.”

(Wayne Swan, Doorstop, 07 / March / 2005)

“It is very important that fiscal and monetary policies do work together to stimulate our economy, to support vital employment in the economy, to support the business community and to support the rural community.”

Hansard, 02/06/2009, p. 5177

[RBA reducing rates] “What we have is fiscal policy and monetary policy moving very strongly in the same direction.”

Hansard, 03/02/09, p.23