Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Hansard source

That was June 2007. The reality is that it was not until the last half of last year that signs developed to demonstrate that the governor’s outlook or forecast was wrong. The forecasts of the Reserve Bank became more troubling, for those who are concerned about inflation, in November and particularly in February.

The reality is that we do have an inflation challenge here in Australia, and the opposition take it very seriously indeed. But we take it so seriously that we do not tell falsehoods about it. The reality is that as far as the numbers indicated, be they the headline CPI or the numerous measures of underlying CPI, inflation was coming down in the first half of this year, following—and no doubt as a consequence of—the three rate rises in 2006. In other words, it appeared that monetary policy was doing its job. Inflation had been going up, the Reserve Bank tightened the screws—that is their job—and put rates up 75 basis points over that year, and inflation started to come down. The signs that inflation was not behaving as the governor had suggested in June 2007 only started to become apparent—and, of course, not everybody was as convinced as everybody else—in the June numbers, when they were released in the second half of 2007. It is very important to recognise that, throughout the 47 quarters of the Howard government, inflation, whether you measure it as the headline rate or use any of the underlying measures, was managed within the target band. The objective of inflation targeting, which the Treasurer signed off on in December 2007, in essentially the same form as it had been for some years, is to maintain inflation—and inflation is consumer price inflation or the headline CPI—within the band of two to three per cent on average over the cycle. It is expressly stated that it will not be within that band in every quarter. It is designed to allow for fluctuations above and below the band. The focus is on the average. The record is there. If you take headline CPI, it is between two and three per cent; it is 2½ per cent. You can take the underlying measure that is calculated on an exclusion basis by eliminating volatiles, and it is around 2½ per cent. You can take the weighted median, another underlying measure, and it is 2½ per cent. The trimmed mean is 2½ per cent.

That was the test that was set in the objectives of monetary policy agreed to by Peter Costello in 1996 and restated a number of times, most recently by the Treasurer. And it was met. Yet, if you listened to the Treasurer’s rhetoric, you would think the economy had been left in a mess. This is an economy with unemployment at a 35-year low and there are more Australians in work than ever before. I see a new member, a former secretary of the Australian Workers Union, opposite me. I wonder what he thinks about being a member of a government that has no regard for employment. There was no thrill of excitement, no delight expressed from the government benches, at the unemployment figure today. It was down to 4.1 per cent. When we were in government and new employment numbers came out, Peter Costello was on his feet, filled with pride that there were more jobs. What has gone wrong with the Labor Party? I remember Neville Wran used to say, ‘Jobs, jobs, jobs.’

What is the economic objective of the new Rudd government? The truth is that the objectives of monetary policy are not just to deal with inflation; they are to maintain medium-term price stability and that means handling inflation. We are all committed to that. But equally important is maintaining full employment. Yet we seem now to have a government that has no interest in maintaining full employment.

When we talk about Reserve Bank warnings, we hear about these 20 warnings. This is the most selective list. It is a long list. They are invariably quotations from Reserve Bank documents taken dramatically out of context. One of the documents is the one I just mentioned from June 2007, where, in fact, far from warning the government that inflation was going up, the Reserve Bank governor said: ‘Don’t worry. We’ve got everything under control. It is heading down. Things are looking good.’ I just quoted it. That is exactly what they said.

Inflation is a huge challenge. Managing Australia’s economy is a huge challenge. But it has to be done responsibly. It has to be done with language that is moderate, objective and above all accurate. At the moment, the Treasurer, far from taking on economic challenges, is creating economic problems himself.

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