Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Hansard source

I echo the comments of the member for Dobell and my thanks go to the Reserve Bank governor and his entire staff for the work that they do as well as the secretariat of the committee for their hard work in putting together the report.

It is a privilege to be involved in this committee and have that opportunity to address what are some of the weightiest issues this parliament considers. The Reserve Bank governor, in the course of the hearing that was undertaken earlier this year and in his numerous statements since then, has outlined—and these are echoed in the report—some fairly sound warnings and some fairly sound observations about what is taking place with our economy.

Firstly, I think we have to acknowledge, and the Reserve Bank governor has made it very clear, that the conditions the government based a series of judgments on have not proved to be as bad as anticipated. The Reserve Bank governor has said on numerous occasions ‘the risk of serious economic contraction in Australia has now passed’. That was on 3 November 2009. In his speech on 15 October he says:

Now that the risks of really serious economic weakness have abated …

He also says:

The period of greatest weakness in the Australian economy has probably passed.

The government sometimes suggests that the opposition is being reckless in making these observations but I merely restate the observations made by the Reserve Bank governor through this process. The other thing the Reserve Bank governor said on 15 October was that:

The Board is also conscious, though, that a risk-management approach requires policy to be recalibrated as circumstances change.

The Reserve Bank governor knows that circumstances have changed. He has said that very clearly to our committee. He has said it very clearly in the various statements that he has made in that capacity, but I am disappointed that the government does not seem to be heeding that message. Circumstances have changed. Policy is required to be recalibrated. The Reserve Bank is doing that job. The government is not recalibrating its policy and is continuing to spend money on the same timetable and the same process.

The other point that the Reserve Bank governor made was about delays in the delivery of the various programs and stimulus packages that eventuated. At the time of our hearing back in August, he was not concerned that there might be slippage in the program. But, as we have seen since then, with delays in the education program and also those that I am noticing in the housing program, as these stimulus projects start to lag and fall into a different part of the cycle, there is one inevitable conclusion, and that is to put further pressure on interest rates than would otherwise be the case.

In addition to warning about how conditions have changed and that there is a need to reconsider one’s position, the Reserve Bank governor has said that it is important for monetary policy and fiscal policy to work together. The Reserve Bank governor has made that very clear. In fact, the Treasurer has also made it very clear. In February of last year he said:

It is very important that we put in place a fiscal policy that backs up the monetary policy which is put together by an independent Reserve Bank … And because, as the Minister for Finance and Deregulation was saying, spending has been out of control, we have got to bring it back into control.

I will further quote the Treasurer. He said on 23 February 2008:

One of the reasons the Reserve Bank has been backed into a corner is that you … spent and you spent and you spent and you spent.

In the context of the Reserve Bank’s comments and warnings, I still find it a concern that, while the Reserve Bank makes these warnings to the government, we are not getting the prudent response from the government that we would anticipate. The Reserve Bank is choosing to be prudent, but the government are continuing to spend in an effort to promote themselves rather than taking the pressure off interest rates, which will inevitably be in the system for the reasons the Reserve Bank governor has outlined.

Thirdly, the Reserve Bank governor has made some very important warnings about bottlenecks that will frustrate our recovery, particularly in the housing sector. There was significant discussion about this matter in the hearings. He made it very clear that this is a supply problem. It is not an issue of finance. It is not an issue of demand management or other demand factors; it is a serious issue of supply. He also made it very clear that monetary policy was not the tool to control asset prices and it would not be used by the Reserve Bank for that purpose. It is not in their charter to do so. He has highlighted that supply issues of land zoning, land approvals and other constraints that exist at a state and local government level must be addressed. Otherwise, we are going to have a very serious housing affordability problem. The government can focus on other areas, particularly the public sector, as far as housing goes, but if they do not address private housing we will have a major issue.

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