Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Hansard source

Economics 101, I say to the member for Moncrieff. Let me tell the House how these tax cuts should have been funded. These tax cuts are long overdue, and Labor support them; we have indicated that. We think they could have been designed better, but Labor support these long overdue tax cuts designed to compensate people for the higher interest rates, higher petrol prices, higher private insurance costs and all of those things which are hitting families every day. Of course we support them—in distributional terms they are much fairer than those proposed in last year’s budget. But they should have been funded out of the proceeds of our productivity gains over the last decade—the productivity gains we have not made.

When Labor left office we were enjoying productivity growth of around three per cent. In more recent times it has been between one and 1.5 per cent. This is a real issue for Australia. As Paul Keating is still fond of saying, if you have wages growth at four per cent and productivity at three per cent, it leaves one per cent for inflation—pretty simple arithmetic. But if you have wages growing at four per cent and productivity at only one per cent, it leaves three per cent for inflation. Labor broke the back of the inflation bogy but this government is bringing it back as a result of its failure on the productivity front. That is why the Reserve Bank governor has his finger poised on the higher interest rate button. This is a government that went to an election promising to hold interest rates at their current levels. Every time the Prime Minister appeared publicly he was behind a lectern which had written on the front of it ‘Keeping interest rates low’. But that will not be the case—firstly, because these cuts should have been funded out of productivity gains and were not and, secondly, because we are putting a heap of money into consumption, which is in itself inflationary. Our high level of foreign debt is still too much directed to private consumption instead of productivity improvements.

See this speech in context