Phillip Barresi (Deakin, Liberal Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Would the Treasurer outline to the House prospects for the Australian economy and risks to the economic outlook? Are there any other views?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I thank the honourable member for Deakin for his question. I can inform him that the current expansion of the Australian economy is longer than any other expansion that Australia has ever recorded. Unlike other countries that have had downturns in recent times, including the United States, Japan and much of Europe, the Australian economy has continued to grow. At the moment the economy is rebalancing somewhat. It was led, in recent years particularly, by consumption, but we are seeing a slowing in relation to consumption and hopefully a pick-up in relation to Australia’s external trade. This of course is being led by the emergence of China and India, and the emergence of China and India has also led to very strong prices for energy and commodities.

Notwithstanding all of that, the terms of trade increase that this has brought about could well be a difficulty for the Australian economy. In the past, every time there has been a terms of trade boom, inflation has got away in the Australian economy and it has invariably been balanced by a very severe downturn. So the task of managing the economy at the moment includes managing a terms of trade boom to ensure that it does not end badly, as it has on previous occasions.

In a statement on the conduct of monetary policy which was released today, the Reserve Bank also underlined an assessment which is very similar to the government’s assessment of the Australian economy. It noted that, given the current level of oil prices, headline inflation would remain close to three per cent in the short term. But it is important that we make sure that the increase in petrol prices does not have second-round effects and does not come back into the general economy, because, if it did, that would put pressure on monetary policy. Notwithstanding all these challenges, Australia is set for continuing growth on low inflation with a very strong budget position, which is important to maintain our present discipline.

I was rather interested in an unexpected endorsement of economic policy last week from the new Premier of Western Australia, Mr Alan Carpenter, who noted the growth of the national economy. He noted the low unemployment and said, ‘The GST, which I opposed, has been in the interests of the country.’ I thought that was a very interesting observation from the new Labor Premier of Western Australia. I do not think I have ever heard anybody in the federal Labor Party turn around and say that the GST was in the interests of the Australian economy. The last-known word from the Leader of the Opposition on the GST was a word which began with ‘R’, the word which dare not speak its name. As for the member for Hotham, he made a career out of opposing the GST. He is not here today; he is no doubt back home saving his preselection—and well he might. He would enjoy a bit of support from the Leader of the Opposition when it came to saving his preselection.

I want to place on record that we are standing with the member for Hotham, the member for Maribyrnong and the member for Corio against the factional forces down there in Victoria which are going to roll each and every one of them out. We appreciate you even if the factional bosses of the Labor right wing do not. On the other hand, that may be a kiss of death—so we are opposed to the members for Corio, Maribyrnong and Hotham! But, in terms of economic thinking, the Leader of the Opposition is back where he was in 1998 with his roll-back policy. He has shown no modernity, no maturity and no improvement. He is less ready for government now than he was then, and the Labor Party cannot be trusted in relation to economic policy.