Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Hansard source

If we look at the overall global problem of inflation, the governments of the world basically divide into two categories: those which are taking on the inflation challenge and those which are seeking to run away from it. Those opposite join the latter group whilst we on this side of the House are very much in the business of doing what government can to bring down inflationary pressures. If you have inherited 16-year-high inflation rates—because that is the objective economic record of the member for Higgins, a 16-year-high inflation rate; there is no disagreeing with that as it is a fact—then the challenge is what you do about it. You could put your head under the carpet—that is what those opposite are pretending to do at the moment—and blame a Labor government that has been in office for six months after they had 12 years to address supply side constraints in the economy. They had 12 years to deal with the other factors impacting on inflation, like skills and infrastructure, and they did nothing, and in six months—mysteriously—all these things have come home to roost for us, the new Australian Labor government. That is their thesis. It does not even bear logical scrutiny. Serious economic commentators around the world describe the inflation challenge as real. The OECD’s most recent economic outlook on 4 June states:

To avoid rising inflation expectations causing strong wage growth, monetary conditions need to be kept tight until domestic demand and price pressures have moderated sufficiently. In this context, the stabilising role that fiscal policy should play is welcome.

Fiscal policy is budget policy. What is the cornerstone of budget policy? Whether you have a surplus or whether you have a deficit; whether you are going to run a $22 billion surplus or conduct a $22 billion raid on that surplus. We can go also to the minutes released by the Reserve Bank on 3 June. They state:

Members observed that the budget surplus as a ratio to GDP was noticeably higher for 2007/08 and 2008/09 than had been expected in the Mid-Year Economic and Fiscal Outlook last October; at that time, a surplus of a bit over 1 per cent of GDP had been projected for both years. Measured in terms of the change in the surplus, fiscal policy was expected to impart a mildly contractionary effect on the economy in 2008/09.

You see, responsible economic analysts, regulators and commentators recognise that inflation is a problem and that fiscal policy has a role to play. We on this side of the House have developed such a fiscal policy. The contrast lies in what has happened in the Senate today. The Leader of the Liberal Party—that is, before the member for Wentworth makes his move—has directed his colleagues in the Senate to act in a way which has the effect of stripping away $300 million worth of real money from the budget surplus. A few hours ago in the Senate the coalition used its majority to defer the votes on several key budget measures. This is not an academic exercise; this is a real exercise involving real money—$300 million. It depends entirely where those opposite now go in terms of future votes in the Senate. A $300 million assault on the bottom line means that the task of reducing the overall burden on outlays will become much harder in the future. This is real money. It affects the bottom line. Therefore, I will be looking very keenly to those opposite to come up with any proposal by way of spending cuts.

Have we on this side of the House heard a proposal yet for a single savings initiative from those opposite? I cannot remember one from the last budget or the one before because their simple recipe for the future has been, ‘Get out the printing press, print some more money, off you go!’ It has been as irresponsible as that because their spending initiatives have not been accompanied by savings initiatives. We have come up with billions of dollars of savings initiatives on this side of the House. What is pathetic, Leader of the Opposition, is this: you fail to engage seriously in the economic debate. As those who stand up and seek to represent themselves as the alternative government of Australia, you are required to say, ‘We will save here, here and here in order to fund the following initiatives.’ By contrast, the Liberal Party, who once said they were the party of natural economic management, say, ‘We will spend, spend and spend.’

Labor comes up with a $22 billion surplus. Those opposite make a $22 billion raid on that surplus. I draw the Leader of the Opposition’s attention to the action of his colleagues in the Senate. Today has been D-day in the Senate. The Liberal Party have voted against budget measures in the Senate. As a consequence, we will now achieve at least a further $300 million real assault on the budget bottom line. Those opposite stand condemned for this gross act of economic irresponsibility.

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