Wayne Swan (Lilley, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is to the Treasurer. I refer the Treasurer to the speech last night by the Reserve Bank governor, Glenn Stevens. Does the Treasurer agree with the governor’s assessment that rising inflation is:

... not just because of prices of petrol and bananas.

What factors does the Treasurer believe are putting upward pressure on inflation and interest rates?

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

That question was close to asking for opinion, but I will call the Treasurer.

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

Of course, I have seen the speech by the Governor of the Reserve Bank last night. I note in passing that of course the member for Lilley has sought to misrepresent it. He did not say anything about skills in his speech last night. It did not stop old Gilligan over there running around and claiming that he did. In relation to inflation, we had 1.6 per cent—

Kim Beazley (Brand, Australian Labor Party, Leader of the Opposition) Share this | Link to this | Hansard source

You want to be Skipper.

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

Come on, Skip! With a skipper like that, it is a wonder the rest of the cast could get in the boat! But in relation to the CPI—

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order: relevance. I am sympathetic that the Treasurer has a bad case of skipper envy, but would you bring him back to the question?

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

The member for Cunningham will resume her seat. The Treasurer has only just begun to answer his question. The Treasurer is in order. I would remind the Treasurer: he should refer to members by their electoral division or their title.

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

We all know who he is talking about: the member for Brand, affectionately known as ‘Skip’ around the parliament. In relation to the CPI, the two largest elements for the June quarter were in relation to fruit and vegetables and petrol. Of 1.6 per cent movement in that particular quarter about one per cent was made up of those two items. Ex of those two items, you had a CPI of about 0.6 per cent. But, under the agreement that the government has put in place with the Reserve Bank, the agreement that the Labor Party opposed and wanted to sue the government for entering, we will be looking at underlying inflation over the course of the cycle. What we will do is look through one-off factors which we believe will pass through the system such as the effects of cyclones and oil prices. We are looking for underlying inflation—that is, inflation in general goods and services. Obviously, petrol will have delivered some pressure as a second round effect in relation to those and, obviously, commodity prices will have delivered some second round pressure in relation to those. It is the key second round, underlying or general price movements that are the focus of activity under the agreement between the government and the bank. That is what we focus on. It is made clear by the governor, it is made clear by me and it is made clear by the agreement between the two of us.