Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Hansard source

I thank the member for Robertson for her question. She is a very strong supporter and advocate of the local small business community on the Central Coast of New South Wales. The national accounts released today are reassuring news at a time of global uncertainty in an economic downturn, but they also confirm that the fight against inflation here in Australia is far from over. Members opposite will be aware that, when the Rudd government was formed, we inherited an inflation rate at a 16-year high. This is despite 12 interest rate rises in a row. We know that high interest rates are public enemy No. 1, but they are especially the enemy of small business.

There have been several small business surveys that have confirmed that businesses are identifying high interest rates as a key factor affecting business confidence and their business planning decisions. I will refer to three of them. One is the National Australia Bank’s quarterly business survey, which says:

… the combination of much tighter financial conditions, falling global equity markets and the global credit crunch has produced a sharp fall in business confidence.

The Dun and Bradstreet National Business Expectations Survey says:

… the combination of high interest rates and market turmoil has fuelled executive concerns regarding the impact of the credit market on operations.

And, finally, an SAI Global/ACCI survey on investor confidence was released and in relation to that ACCI said:

The survey shows that interest rates and ongoing financial sector turmoil has significantly dented business confidence.

The point is that interest rates are having an effect on business confidence and on business planning decisions.

The budget, however, is designed to help put downward pressure on interest rates through putting downward pressure on inflation. It is a contractionary budget, Malcolm, with a surplus of almost $22 billion or 1.8 per cent of GDP. It cuts spending growth from five per cent in the current financial year down to one per cent. I am reminded that, at the time of the release of the former Prime Minister’s biography, the member for Higgins was prompted to say about the then Prime Minister, ‘In formulating budget policy, I showed him the menu and he took the entree, the main course, the dessert and the vegetarian option.’ It was an unprecedented spending spree and we are now reining in that irresponsible government spending.

Indeed, the budget cuts spending as a share of gross domestic product goes from 24.4 per cent to 23.4 per cent. That is a full one percentage point reduction in government spending as a share of GDP in a single year. That is a very big achievement for the Treasurer, for the Minister for Finance and Deregulation, the Prime Minister, for everyone involved in formulating that budget—bringing in a budget surplus of $22 billion, 1.8 per cent of GDP, and a very, very substantial reduction in government spending as a share of GDP. And that is why it is vital in this fight against inflation that this budget is passed by the Senate, so that it can do its work and help put that downward pressure on inflation and downward pressure on interest rates. The last thing small businesses in Australia need is a $22 billion raid on the surplus, which is being orchestrated by the coalition. That would be very bad news for small business and very bad news for the Australian economy.

The budget also helps ease the capacity constraints, which were identified again yesterday by the Reserve Bank in its statement announcing that it was keeping interest rates on hold. There was some dispute about this. The infrastructure minister was pointing this out. He was asserting that the Reserve Bank did identify capacity constraints. Members opposite do not seem to believe there are any. But the Reserve Bank does say, from that statement yesterday:

Inflation in Australia has been high over the past year and in an environment of limited spare capacity and earlier strong growth in demand.

So there you have it, Mr Speaker: yet again, on top of the 20 warnings, another warning yesterday saying that the problem is—

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