Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Hansard source

Members will be aware of newspaper reports today on the outlook for Australian minerals and energy exports from a report from the Australian Bureau of Agricultural and Resource Economics which indicates an expected 50 per cent increase to $178 billion in export income for Australia in the 2008-09 year from minerals and energy exports. That is a huge increase in the amount of money coming into Australia through these exports projected for the forthcoming financial year.

That is great news for Australia. That money will flow through the Australian economy not just to the companies involved but to their shareholders and employees, to contractors and to small businesses—and it will gradually spread across much of the economy. That is good news for most Australians. It does, however, underline the importance of the ongoing battle against inflation and of the need to have a strong budget surplus and to put strong downward pressure on inflation. Typical demand driven inflation, of course, consists of too much money chasing too few goods and services. In an economy that is running at close to full capacity—as the Australian economy currently is—if you have such a substantial injection of additional funds into the economy without a matching increase in economic capacity, inevitably inflationary pressures build. The serious risk for our economy is that that will end in a wage and price spiral and that inflation will become embedded and therefore you will end up with significantly higher interest rates.

It is, therefore, absolutely critical that as well as getting the benefits from this huge surge in our national income we have very strong anti-inflationary measures in place in order to ensure that it does not fuel inflation—that we get the benefits without the potential downsides of higher inflation and higher interest rates. That is why the government has put in place three key strategies in the budget in order to fight inflation. First, we have a very, very substantial surplus, much larger than was initially projected for the forthcoming year in the budget last year by the previous government. And, indeed, we are reducing the rate of growth in government spending from five per cent per annum down to one per cent per annum. Second, we have put in place three large long-term infrastructure investment funds—the Building Australia Fund, the Education Investment Fund and the Health and Hospitals Fund—to provide for the long-term investment in the nation’s economic capacity that will help us to grow in a sustainable way into the future. We have also put in place other initiatives designed to improve economic capacity, such as the increase in the childcare tax rebate to encourage greater participation in the workforce and, indeed, the education tax credit to encourage parents to invest in their kids’ education.

Third, as has been indicated by the Treasurer, we have put in place very substantial tax cuts that will also boost participation but that, primarily, will help to cushion the burden on individual taxpayers and their families from rising prices that we are endeavouring to deal with as part of that inflation threat that we have inherited from the former government.

The opposition’s reaction to the government’s budget strategy in dealing with what is a very serious inflation challenge has been spectacularly boneheaded. They have tried on every front imaginable to unravel the surplus—to erode that substantial surplus that the government has put in place as the bedrock of its efforts to put downward pressure on inflation—and they have tried to jeopardise the investment funds that we are putting in place to invest in economic capacity for the future. There has been something of a competition on the part of members of the opposition as to who can come up with the biggest or the best fuel excise policy. We have now got no fewer than five different fuel excise policies on the part of the opposition. Malcolm says nothing, Brendan says five—

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