Stability first:PM

The Prime Minister has finally come out and said it.

“The first responsibility that we have as a government is to ensure the strength of the Australian economy and the strength and stability of the Australian financial system,” he said after meeting State premiers in Perth last night.

Well, perhaps not quite the first.

Defending the realm usually takes that position.

But let’s not quibble.

Mr Rudd probably put it better, when he had a second go at the reporter’s question.

“This is fundamental,” he said.

“It is fundamental to everything.”

He is, of course, absolutely right about that.

Mr Rudd  explaining why his government has softened its earlier position on Australia’s banks.

Even a week ago, the government was pressuring the banks to pass on any cut in Australia’s official interest rates, in full.

It isn’t, any longer.

That’s because the global financial meltdown is a whole lot worse now, than it might have appeared to be then.

And the dangers are that much greater.

Australia’s banks are, indeed, well governed and well capitalised, as the government keeps telling us.

But that does not mean that they could not be touched, to some extent, by the world’s financial crisis.

The government is right to take one step back, and allow Australia’s banks to protect their position, at this delicate stage, by passing on only part of the interest rate cut that the Reserve Bank is expected to announce next Tuesday.