Simon Kennedy (Cook, Liberal Party) Share this | Hansard source

Yes. I'm sorry. I think there might have been one 'you' in there. I was trying to refer to him as the Treasurer. The Reserve Bank has been extremely successful in managing inflation. As I said, between 1976 and 1984, inflation was growing by 9.3 per cent annually; between 1985 and 1992, inflation was growing by 6.3 per cent annually; and following the implementation of this target, between 1993 and 2023, inflation increased by just 2.6 per cent. This was the first soft-edged target adopted by a reserve bank in the world, and nearly all advanced economies now use the same framework.

When reflecting on this agreement, Prime Minister John Howard said, 'It gave confidence that interest rates would be set reflective of economic conditions, rather than immediate political considerations.' The RBA implemented a rate rise in 2007, held almost on the eve of a federal election, confirming the independence of this body. The Reserve Bank has saved Australian consumers and businesses billions and billions over the years in price increases driven by inflation and has saved their money from being devalued. It is regrettable that Labor and the Treasurer have chosen to throw away bipartisan convention when reforming this important institution and have instead chosen cheap populism with the Greens political party.

Australian needs a strong Reserve Bank now more than ever to combat inflation when we have higher inflation than most developed countries around the world. Interest rates are the major policy lever to combat this cost-of-living crisis we are now struggling with. This policy lever is crucial for the government given core inflation remains stubbornly high, higher than almost all other advanced economies in the world, at 3.8 per cent. Our core inflation is higher than that of the US, the UK, New Zealand, Canada, Japan and many other countries.

The Reserve Bank has provided crystal-clear advice that inflation remains too high. The governor is on record as saying:

Make no mistake, inflation is still too high and the board does remain concerned about the degree of excess demand in the economy.

The bank went on to call out Labor's inflationary spending and said:

The stronger outlook for public demand reflects ongoing spending and recent announcements by federal and state and territory governments.

That was the response, saying the government has its foot on the accelerator while the Reserve Bank is jamming on the brakes. The Australian economy is left to suffer in response.

What was the response to the bank's frank and fearless independent advice? Dr Chalmers, who has just left the chamber, said interest rates were 'smashing the economy', ignoring his own role in creating inflation. His former boss, mentor and president of the federal Labor Party, Wayne Swan, was quick to add that 'the RBA's punching itself in the face'. Then Jacob Greber, a journalist, said a senior Labor figure, who wasn't named, claimed the governor is a 'nutter', called the Reserve Bank 'barbarians' and called them 'weirdos'. What an attack on an independent institution as legislation where they can stack the board is coming before the House. The timing could not be more politically motivated or better. It's an absolutely ridiculous attack on what is one of our best institutions.

We have seen two former RBA board members come out and decry these comments made by the Treasurer and his mentor, Wayne Swan. Former RBA board member Warwick McKibbin said:

You want to think that the government and the central bank are working together in the same direction for the benefit of the country. To make those sorts of comments suggested that maybe there's some other agendas at work—and that's not helpful.

There sure are other agendas at work. Another former RBA member, Graham Kraehe, said:

For the treasurer to then be coming out and saying, 'Well, this is the Reserve Bank's fault'. I don't think another serious economist in the country … would agree with that.

They are fighting with the Reserve Bank currently. They are fighting with past board members. The Treasurer has tied one arm behind the RBA's back in trying to fight inflation with his loose fiscal policy and is shocked at this tight monetary policy, and it means we'll have higher rates for longer. Sadly, the people who will be hurt the most from that are everyday Australians, everyday families doing it tough. This loose fiscal policy has included an extra $315 billion in additional spending since 2022. That's $30,000 per household. Those opposite love to say, 'The coalition's going to be cutting $315 billion and hurting families.' But I'll tell you what: people in my electorate of Cook do not feel $30,000 better off. When I ask them how they feel after the last 2½ under a Labor government, they tell me they feel much worse off.

Make no mistake: the government has created this inflation crisis. The federal government is at an equal record of 11.8 per cent of GDP for the last quarter. The only other time a federal government has been at this level was during COVID-19—never, ever before. So, while we have high rates, while we are trying to take some of the demand out of the economy, they are stuffing the economy full of money, keeping interest rates higher and devaluing hardworking Australians' bank accounts and money at home.

What does that mean as a result? What have we seen? Productivity has cratered to 6.3 per cent. Not only are household savings being devalued by inflation; they've dropped 10 percentage points. We have the slowest GDP in over 30 years—since the early 1990s. We've been in a household recession for 18 months. What does that mean? It means that per capita GDP is going down. That means that each household is getting poorer and living standards are dropping. These are the implications of this policy for everyday Australians.

The Treasurer is intent on assigning blame for these higher interest rates to everyone but himself. Food is now up 12 per cent. Energy is up 14 per cent, even after these rebates they crow about. They have the hubris to crow about a rebate when the average Australian is paying 14 per cent more in energy prices. Day after day, in question time, I have to listen to them slapping themselves on the back about rebates. It's a one-off rebate that is now gone, while Australians are left with energy prices that are 14 per cent higher, and that's just in a year—it's well over 20 per cent over the last two years.

There's deferred health care. In 2023 a report by the Productivity Commission revealed that more people postponed or skipped GP visits in the preceding 12 months because of cost. Another report revealed that almost 50 per cent of people forwent heating their home. Labor's big spending agenda is keeping inflation higher.

What are the mechanical issues with this legislation? It's surely the role of this parliament to safeguard and promote the strength of the Reserve Bank, one of the most critical institutions in this nation. Strong institutions, like this bank, this parliament and the Public Service, are vital to a strong economy and a strong democracy. They were the model that the rest of the world followed only 30 years ago, but right now we are weakening them. Any actions that undermine the strength of our institutions need to be called out and halted. The comments made by the Treasurer, the former Labor Treasurer, the current president and an unnamed coward calling the Governor of the Reserve Bank a nutter were timed precisely, just before this legislation coming before the parliament.

The fundamental fault of this legislation is that it doesn't transition existing board members into the monetary policy board. Further, and less importantly, the section 11 test of 'extreme circumstances' has not been defined, leaving a back door for political decisions on what should not be political. Managing our economy is too important. We on this side of the House care about it, and we're not about to let the government wreck it. There's also an opportunity for Labor to stack the board, which they've already jumped at by appointing two former union officials to the board earlier in their term.

What are the risks of the Labor Party compromising with the Greens political party to deliver this reform, and what is the response of the Treasurer to the issues identified by my colleague the shadow Treasurer? Instead of bipartisanship with the coalition, the Treasurer now reportedly wishes to make a deal with the Greens. They don't value the independence of the Reserve Bank. They just called on the government to overrule the Reserve Bank on interest rate rises now, in an election period. That's what we just heard in this chamber. It's extremely dangerous. The Greens policy thought bubble on this significant issue was to try and retain section 11 of the RBA act and grant the Treasurer a veto over decisions made by the Reserve Bank. If you think inflation is bad now—if you think your money is worth less than before and you're worse off than you were 2½ years ago—wait until they get the Treasurer to work on this provision. It's going to get worse. We're standing up for the independence of the Reserve Bank and we're standing up for everyday Australians.

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