Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Hansard source

It is an average, he says. He is having real trouble with the inflation figure. But the best has been his solution. He is full of advice for the Treasurer on how you can fix inflation. He has a plan. It is a cunning plan. It is very smart: ignore it and it will go away. ‘Stop talking about it,’ he says, ‘and it will go away. Don’t talk about inflation, because you put it up.’ So when I saw the Reserve Bank’s statement on monetary policy I thought: ‘Oh well, they’re going to say that the cause of inflation is the Treasurer’s comments. They’re going to say there’s too much inflationary expectation in the economy, so that’s what’s causing inflation.’ But what did the Reserve Bank say? They said:

Given the current strength of domestic demand and pressures on capacity, a significant moderation in demand will be needed if inflation is to be satisfactorily reduced over time.

They said nothing about inflationary expectations, nothing about the Treasurer’s comments. They recognise that the causes of high inflation are the supply-side constraints in the economy and the roaring demand throughout the economy. But the shadow Treasurer has, in just two short months, developed a new economic paradigm. He says: ‘Ignore it and it will go away. Put your head in the sand.’ Ostrich economics, that is his solution! Give me Swan economics any time over ostrich economics, because that is his solution. His solution is to ignore it and it will go away.

What a joke! That is his plan as Treasurer. ‘Make me Treasurer,’ he says, ‘and I’ll ignore it. It will go away; everything will be okay.’ What a plan! There you go—the shadow Treasurer’s alternative approach. His fresh idea for Australia is to ignore it and it will all go away. The Baldrick of Australian politics, with his cunning plan, better do something better than that because the Australian economy needs a better plan than that. That is why we have a different plan. That is why we have a five-point plan. Now, what is point 1? It is to put fiscal policy to work and have a budget surplus at least 1.5 per cent of GDP. Why is this important? I will share with the House some quotes. They are not from me. They are not from the Treasurer. They are not from anybody on this side of the House. They are from well-respected economic commentators Access Economics. What did they have to say about fiscal policy under the previous government? Cop a load of this:

Although it is usual for bad spending decisions to cumulate over the life of a government, the quality of spending decisions in recent years has deteriorated even more than usual as the previous government found itself the recipient of a China driven boom in revenues … the spending decisions flying out of Canberra in recent years proved positive Whitlamesque.

Now, we love Gough on this side of the House, but I do not think Access Economics meant it as a compliment. They were not talking about how great it was that government spending was out of a control under the member for Higgins and the previous government.

From 2002, the previous government pumped an extra $40 billion a year into the economy. We are facing inflationary pressures because they have pumped money into the economy which we have to fix. We have to impose the cuts and there will be some tests for members opposite. We will see how serious they are about inflation. We will see how serious they are when we put out our budget, when we put out our cuts and when we put out our expenditure review process. Let us see where they stand on inflation. Let us see how serious they are. Do they go for the cheap political ‘keep the fishing hall of fame’ line or do they support the cuts? There will be some tests for the opposition as we go along in the process. We will see how they go.

The other quote is from the Reserve Bank. What did they say about government revenue and expenditure in their November board minutes? They said:

New expenditure and revenue measures announced since the budget and in the early part of the election campaign had since reduced the projected surplus to around 1 per cent of GDP. This meant that fiscal policy was roughly neutral in its overall effect on growth as conventionally measured, the recent initiatives having offset the ‘automatic fiscal stabilisers’.

You will recall that, when the Prime Minister announced that the budget surplus would be taken to 1.5 per cent of GDP, the shadow Treasurer raced out and said: ‘That would have happened anyway. The government is not doing anything.’ But the Reserve Bank begs to differ with Professor Turnbull. The Reserve Bank points out that the projection was for the budget surplus to be one per cent of GDP and in their words, not mine, effectively neutral. When you have an inflationary economy, you cannot afford to have budgetary policy and fiscal policy effectively neutral. You need a different approach, and that is our approach. There are other elements, of course, to our plan on inflation. We will be examining options to improve private savings. We will be tackling the skills shortage with 450,000 training places over four years. We will be dealing with infrastructure bottlenecks and workforce participation. These are all medium- to long-term solutions. They will not bring down inflation overnight. We have been bequeathed high inflation by the members opposite.

Talking about inconsistency, I was intrigued to hear the shadow minister for finance, the member for Dickson, say that it has been a problem that the Treasurer has not been able to stop the banks from increasing their interest rates over and above the Reserve Bank cash rate. He conveniently ignores that that started while they were in office. The Adelaide Bank increased its interest rates over the Reserve Bank cash rate while they were in office. I do not recall the member for Higgins—the then Treasurer—calling in the Adelaide Bank and having a stern conversation. What is their solution? They are going to use moral suasion. They are going to convince the banks to be good corporate citizens. They are going to call them in and have a very stern chat to them. That is their solution. Their solution to inflation is on the one hand to ignore it and on the other hand to have the Treasurer of the day call in the banks and say: ‘You have been very naughty boys. Don’t do it again!’ They seem to think that will have some effect. Either they are going to reregulate interest rates or they are not. What is your policy? Would you change the law so that the Treasurer sets bank interest rates or not? If you would not then your words are hollow and your policy is an excuse for failure. They are a joke. They have no consistency. They ignored 20 warnings from the Reserve Bank on inflation. Over 12 years, they ignored 20 warnings from the Reserve Bank, as tabled by the Treasurer in question time.

See this speech in context