Steven Ciobo (Moncrieff, Liberal Party) Share this | Hansard source

I am certainly pleased to rise in the Main Committee this afternoon to speak to the Review of the Reserve Bank of Australia annual report 2005, a report put forward by the House of Representatives Standing Committee on Economics, Finance and Public Administration. I am very pleased to have the opportunity to remark on a number of the key findings of the committee’s report into the Reserve Bank’s conduct of monetary policy. This report comes off the back of the hearing that the committee held, chaired ably by the member for Cook, the Hon. Bruce Baird, on 18 August 2006.

It was certainly a momentous day—an opportunity for the committee to give its thanks to the outgoing Governor of the Reserve Bank, Ian Macfarlane, who so ably and dedicatedly led that organisation for approximately a decade. Likewise, it was a chance for the committee to welcome the incoming governor, Glenn Stevens. We certainly look forward to working closely and cooperatively with Glenn Stevens in our capacity of providing parliamentary oversight over the operations and conduct of monetary policy by the Reserve Bank.

I would like to pick up on a couple of points made by the member for Newcastle as well as generally addressing some of the findings of the committee. What we know from the Reserve Bank’s testimony before the committee—from their Statement on monetary policy that they previously released—is that the Australian economy is in very good shape. Thanks to 10 years of responsible and careful economic management by the Howard government and in particular by the Treasurer, Peter Costello, the Australian people currently enjoy a level of prosperity that they have never enjoyed before. The economic certainty—the fact that our economy has been growing successfully for 15 years—underscores the very proud track record that this government has in delivering meaningful prosperity to the Australian people.

On all of the key economic indicators, the Australian people are enjoying a period of sustained economic sunshine. Unemployment is down to a 30-year low. It is foreseeable by both the Reserve Bank and the committee—although it may not be all members of the committee; I am sure the opposition would disagree with us—that unemployment will remain at generational lows, thanks to the strong economic growth created by the Howard government.

It is also worth noting that the Reserve Bank touched on, and expanded upon, comments they had previously made to the committee about the importance of labour market flexibility. About 12 months ago, the Reserve Bank governor indicated to the committee that the Reserve Bank felt that labour market flexibility was a key driver of sustained economic growth into the future. The Reserve Bank governor made it very clear that, for Australia to continue to enjoy the benefits and prosperity that come from sustained economic growth, it was fundamental that there be increased labour market flexibility and that, where governments took the time and the initiative to introduce greater flexibility in the labour force, the consequent benefit that would flow from that increased flexibility was continued economic growth.

That, in large part, underlines the very reason why this government introduced its Work Choices policy. Work Choices provides the very flexibility that a well-credentialled and forward-looking man like the former Governor of the Reserve Bank Ian Macfarlane knows—as, I am sure, the current Governor of the Reserve Bank, Glenn Stevens, knows—is fundamental to maintaining that prosperity. To use the words of the Prime Minister, the reforms of today guarantee the prosperity of tomorrow. It is worth highlighting that, especially for those members opposite who like to discard this kind of information from the Reserve Bank from the public record.

Likewise with respect to inflation. It was very interesting to hear the Reserve Bank board’s thoughts on inflation in Australia. Certainly we know that the headline rate of inflation has been higher than otherwise would ordinarily be desired and, as a committee, we certainly know that the inflation rate—the principal driver of monetary policy in this country—has been bumping at the top of the Reserve Bank’s desired range of two to three per cent. But we also know the reason why this has come about.

The Reserve Bank board, in its Statement on monetary policy as well as evidence adduced to the committee, highlighted that there were an enlarged number of one-off factors that were contributing to this higher level of inflation. In addition to that, the Reserve Bank also highlighted that, given that Australia has enjoyed 15 years of economic prosperity—given that the Australian economy has been growing by over three per cent for nigh on 15 years—it is little wonder that we should be starting to experience some capacity constraints on economic growth in Australia. A direct impact of some capacity constraints is that inflation tends to creep a little bit higher. So there were no surprises for the Reserve Bank and no surprises for the members of the government who sit on the committee. But all of this comes as a revelation to the opposition members, who unfortunately attempted to use the fact that we have had such a long and sustained period of economic growth—and, therefore, some upward pressure on inflation—as being in some way some gigantic revelation, when in fact it is quite the opposite.

What was also clear from the Reserve Bank’s testimony is that this government’s track record of delivering surplus budgets back to the Australian people by way of tax cuts is not irresponsible. What the Reserve Bank made very clear in its testimony to the committee was that tax cuts that maintain a budget surplus of about one to 1½ per cent of GDP are not irresponsible at all, and that is what this government has done. In fact, the Reserve Bank governor went out of his way to clarify remarks that have been misused and misconstrued by members opposite with respect to tax cuts and to highlight that the tax cuts this government has delivered have not been overly stimulatory and have been affordable. Furthermore, what is very clear if one reads between the lines from the Reserve Bank governor’s statements is that it has been the deficit budgets of state governments, when taken in collaboration with the responsible repayment of taxpayers’ money by this federal government through sustainable budget surpluses, that are putting an incredible amount of upward pressure on interest rates. It is not the fact that the Howard government, under the stewardship of the Treasurer, Peter Costello, when it comes to the economy, has delivered money back into the pockets of ordinary Australians. It is not the fact that we provided $34 billion worth of tax cuts. It is the fact that at virtually every tier we have state Labor governments running budget deficits at a time of unsurpassed economic wealth and generation of wealth in this country which is causing the problems.

I say to all the state Labor Treasurers: do not come to Canberra and say that it is the policies of this government that cause interest rates to go up when it is very clear not only on my assessment but on the assessment of those umpires of monetary policy in the Australian economy, the Reserve Bank board, that deficit budgets by Labor state governments are putting an incredible amount of upward pressure on interest rates. I say to all the state governments: do something to get your books back in order.

In addition to that, state Labor governments could also address the overwhelming desire and need to ensure that, when it comes to key infrastructure facilities such as railroads and ports, they actually do something to increase capacity for these key pieces of economic infrastructure that help to expand the Australian economy going forward—the kind of infrastructure that does not see 50 ships floating off the port of Newcastle but actually sees those ships being able to call into port, load up with the various stock, load up with the various commodities, and export them overseas and generate wealth for this country. That is what we need to see.

I would also question, in the less than two minutes I have remaining, what it was that the member for Newcastle was alluding to when she said that part of the problem of housing affordability—and I will touch on this in more detail—was the first home owners grant and the fact that this government has halved capital gains tax. It seems very clear to me that what the member for Newcastle was saying was that the problem with housing affordability is not only a lack of or limited land release or that headwork charges have skyrocketed under state Labor governments but that the federal government is providing stamp duty relief through the first home owners grant and, furthermore, has halved capital gains tax. The member for Newcastle in this chamber only moments ago said implicitly that there should be no first home owners grant and that there should not have been a halving of capital gains tax. I would be fascinated to know whether the shadow Treasurer is supportive of the comments of the member for Newcastle about halving capital gains tax and the first home owners grant being a problem. In both those respects I would be very keen to find out what the Labor Party has to say.

Furthermore, and just expanding on this point a little more fully, it was also clear from the evidence provided by the Governor of the Reserve Bank that the key driver of unaffordability when it comes to housing has been the fact that state governments continue to not release land. This lack of release of greenfield sites by state governments, coupled with skyrocketing headwork charges, has certainly put a huge amount of upward pressure on the prices of homes therefore locking so many young Australians out of the opportunity to buy a home, despite the fact that this government seeks to assist them through, for example, the first home owners grant. As a result of the evidence provided to the committee and outlined in this report, the Australian people can look forward to continued economic sunshine in the future.

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