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

Thank you, Madam Deputy Speaker. The government spokesmen on these issues have constantly told us how they will put downward pressure on inflation. In fact, honourable members will recall that the Assistant Treasurer acts it out and makes a gesture when he says that he is putting downward pressure on inflation. For a long time I thought he was patting an invisible dog sitting beside him. Sometimes he strokes it. He is trying to manage inflation.

The government is quite concerned about putting downward pressure on inflation. But, far from doing that, it is pushing it up. Inflation is now significantly higher than it was when the government changed. It is also significantly higher than it was in January when, to his eternal shame, the Treasurer said the day before the Reserve Bank met that the inflation genie was out of the bottle and out of control. The CPI was three per cent for the December quarter and the average of the trimmed mean and the weighted median was 3.6 per cent. Now we are told by the Reserve Bank that inflation is heading to five per cent. The Treasurer does not say that the inflation genie is out of bottle anymore because he realises the terrible damage that he has done. Far from putting downward pressure on inflation, he has exacerbated inflationary expectations.

What a result we have seen. We have seen growth slow, we have seen jobs lost, we have seen household wealth falling and we have seen real wages fall by one per cent since this government came to office. Yesterday the Prime Minister said that wages had increased by 2.3 per cent. The poor fellow does not know the difference between average and aggregate wages, let alone real and nominal wages. The fact is that real wages have fallen. They have fallen because of the way in which the government has exacerbated inflationary expectations. We have also seen an extraordinary collapse in confidence in Australia. We recognise that the government has to deal with the consequences of the subprime crisis in the United States. The Assistant Treasurer seems to be surprised. He may recall that back in January this year I said that the Reserve Bank should stay its hand and not raise rates because of the subprime crisis. I could see that the credit squeeze that was coming would increase the cost of money and interest rates would go up anyway, regardless of what the Reserve Bank did. That is precisely what has happened. Prior to the interest rate cut today, this calendar year we have had more than one full per cent of interest rate increases and half or more of that is the result of the international credit squeeze. I argued that the Reserve Bank should be prudent, should take the international conditions into account and should stay its hand. It made its own decision and chose to raise rates, and now it is choosing to reduce them. Everyone is entitled to their opinion.

But what the Treasurer did was very different. He did not give the Reserve Bank advice; he egged it on to put up rates. He said inflation was out of control. If you say inflation is out of control again and again and again, it becomes a self-fulfilling prophesy. If you undermine confidence in our financial system, over time lenders will be reluctant to advance funds and businesses will be reluctant to invest. That is why we have the remarkable situation that in Australia, despite its strong economy, the level of confidence is as low as it was when we were having Mr Keating’s recession—the recession we had to have. Of course, we are now having another Labor economic downturn—not a recession, we trust, but certainly the downturn we had to have.

The Reserve Bank has cut rates today, but it has not cut them because inflation has eased; quite the contrary. It has cut them because of this downturn in economic activity. It has cut them because it is concerned that there will be very significant economic hardship in this country. Dr Shane Oliver, the Chief Economist of AMP, wrote today about the environment that we are in. He said that there has been an abrupt downturn in the economy, evident in a slump in consumer and business confidence to recessionary levels. That is what the government has produced: a collapse in confidence to recessionary levels, falling retail sales volumes in the March and June quarters, a slump in housing related indicators, a sharp slowing in credit growth and a softening job market. The list of companies announcing major lay-offs has gone from a trickle to a torrent over the last couple of months. That is what was said by Dr Shane Oliver from AMP. That is the environment that the government has presided over.

We recognise that governments have to deal with all sorts of challenges, problems and threats from outside Australia and, indeed, internally. We do not say that the subprime crisis has been caused by the Treasurer or even the Assistant Treasurer. What we do say is that governments have to deal with these challenges like leaders. Instead of injecting confidence in the economy, instead of speaking positively about our economy, we have a Treasurer, an Assistant Treasurer and a Prime Minister who have consistently talked up inflation and talked down our economy. When you compare what they have said with what other economic leaders around the world have said, you see a stark contrast. At the same time as Wayne Swan was talking down our economy and talking up inflation, his counterpart in the US, Hank Paulson, was speaking confidently of the US economy—injecting confidence and calm into very troubled markets and taking real action to protect American investors and American homebuyers.

That is the stark difference between leaders who have the country’s economic interests at heart and politicians, like those in the government, who simply want to make a mean political point. They have had only one objective all year, and that is to blacken the economic reputation of the Howard government. They wanted to create the myth that John Howard left the Australian economy in a mess. There is nobody in Australia today—Labor or Liberal—who would not rather be living in John Howard’s economy than Kevin Rudd’s. There is nobody in Australia who would not want to see business and consumer confidence levels where they were last year, as opposed to where they are this year.

We had an interesting comparison given to us by the Treasurer and the Prime Minister earlier today about other countries where there has been a serious decline in economic activity and where the economy has slowed or may well be in recession. They cited Japan, Germany, France, Italy and Canada. There is no question that economic circumstances in those countries are much worse than they are in Australia but, in the last six months, confidence has collapsed far more in Australia than it has in those countries. Why is that? It is because the people of Japan, Germany, France, Italy and Canada have more confidence in their governments than Australians do in ours. Why is it that Australia, with a relatively strong economy in these troubled times, has seen consumer confidence decline by twice the global average? There can be no explanation for this other than a lack of leadership from the Rudd government. You cannot blame the global circumstances for this collapse in confidence, because these figures apply all around the world. Why has our confidence collapsed so much? It has collapsed because of a failure in leadership.

The issue is not just the Treasurer and the Prime Minister talking up inflation; it is not just the Prime Minister, only a month or so ago, talking about the ‘inflation monster’ wreaking havoc across the country. It is not just that. It is the sheer impotence and incompetence of this government. Take the big issue of our times and you will see failure. Look at the shambles over the emissions trading scheme: no policy development, no policy progress since the Shergold report of last year. Last Friday, the leaders of some of the largest companies in Australia came together to see the Minister for Resources and Energy and they told him that the incompetent proposals in the green paper would cost thousands of jobs and tens of billions of dollars of investment. The parliamentary secretary sitting across from me, the honourable member for Brand, knows that better than most, from his past experience with Woodside.

Looking at the great challenge of water, we see the extraordinary change that we made when we were in government, when we said the interstate rivers and groundwater systems of this country must be placed under federal leadership. That was our national plan for water security. That was our vision, our leadership. What have we had from Labor? Oh, they endorsed it when they were in opposition. That was part of the me-too strategy. Now, in government, they have surrendered control back to the states. They have sold out to Victoria. They have given the Victorians, the New South Welshmen, the Queenslanders and the South Australians the money but they have surrendered leadership. There is no longer a federal government that is taking the lead on water. We are back to the old days of consensus management where, as we have seen for over a hundred years, so little can be done.

Then of course we have seen the incompetence over prices. Promises were made to Australians about fuel prices, and what have we got? Fuelwatch, this most incompetent scheme, which every expert department in this city has described as something that will put up the price of fuel. It is a scheme that has been condemned by the expert advisers and, indeed, by the Assistant Treasurer’s own colleagues. Worse still, we have got what I think is the absolute pinnacle of incompetence of this government: ‘grocery watch’. For a whole year they trailed around supermarkets, dripping with empathy, and said they would do something about grocery prices. We have seen $14 million of taxpayers money spent to produce a site that has no useful actionable information for the consumer but is simply a means of promoting Coles and Woolworths and defaming and undermining the commercial reputation of the independent retailers who compete with the majors. This is a government that has failed to lead and failed to provide the confidence we need. The slowdown we are having is the cause of these interest rate cuts. This cut in rates has been paid for with thousands of jobs. (Time expired)

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