Andrew Laming (Bowman, Liberal Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Would the Treasurer outline to the House why disciplined economic management is more important than ever in the maintenance of low interest rates and low unemployment? What are the threats on the horizon?

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

I thank the honourable member for Bowman for his question. I can tell him that it is important to the Australian people that unemployment stays at 30-year lows, as it is currently, at 4.8 per cent. It is important that we continue to keep our economy growing, as it has, in the longest stretch of continuous economic growth ever recorded in Australia. But of course challenges will come to us from time to time. At the moment, we have the challenge of record high world oil prices—the challenge that that is bringing at the petrol pump—and also inflation, but it is important that we do not take our eye off the ball and that we continue disciplined economic management. This was a point that was made by the Governor of the Reserve Bank in an interview in the Weekend Australian on Saturday, which all members would have seen and read. Ian Macfarlane, the Governor of the Reserve Bank—a position he has held for the last 10 years—

Anthony Albanese (Grayndler, Australian Labor Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

Mr Albanese interjecting

David Hawker (Speaker) Share this | Link to this | Hansard source

The member for Grayndler!

Anthony Albanese (Grayndler, Australian Labor Party, Deputy Manager of Opposition Business in the House) Share this | Link to this | Hansard source

Mr Albanese interjecting

David Hawker (Speaker) Share this | Link to this | Hansard source

Order! The member for Grayndler is warned!

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

with probably the most significant economic job in Australia, was interviewed in the Weekend Australian. He was asked about fiscal policy. He said:

I have been lucky—for most of my time, fiscal policy has consisted of small surpluses.

He is contrasting that with the deficits that his predecessor had for most of his period. He said:

So the movement in the government account has not been big enough to be important in the consideration of monetary policy.

It might become an issue because the states are now part of that equation.

It is a very interesting statement from the Governor of the Reserve Bank. He would very rarely make a comment about the states. The Commonwealth budget is now in surplus, with nine surpluses out of the last 11 budgets. In 2004-05 the states had a surplus collectively of $4 billion. In 2005-06, they had a surplus of $1.2 billion but in 2006-07—the current budget year—collectively, the states and territories of Australia are forecasting fiscal deficits of almost $5 billion; that is, the Labor states and territories have now driven their budgets out of surplus and into deficit. Based on available information for the state sector as a whole, the states are forecasting to increase their net debt over the next four years, from 2005-06, by $43 billion. So here we are: we have had the Commonwealth government retire $96 billion of Labor debt and we have the eight Labor states and territories proposing to borrow another $43 billion of net debt.

As I have said on a number of occasions, all other things being equal, if the government is a saver rather than a borrower, the government is exerting downward pressure on interest rates and, if the government is a borrower rather than a saver, the government is exerting upward pressure on interest rates. We now have the Commonwealth government exerting downward pressure on interest rates and fiscal policies at the state level working counter to that—a point that the Governor of the Reserve Bank felt compelled to make on Saturday, and I only wish that every single member of this parliament had read the newspaper on Saturday morning.