Julie Collins (Franklin, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Can the Prime Minister update the House on the challenges confronting the Australian economy and the government’s response?

Kevin Rudd (Griffith, Australian Labor Party, Prime Minister) Share this | Link to this | Hansard source

I thank the honourable member for Franklin for her question. Australia faces a range of economic challenges at present, challenges which come from abroad and challenges which are being generated domestically. From abroad we see corrections to growth projections across many of the developed economies in the world, coming out of in part the subprime crisis in the United States—revision downwards in growth for the American economy, those in Europe and those in Japan.

But on the domestic front we also face a serious economic challenge arising from inflationary pressures in the economy. At the time the government took office at the end of last year, inflation in this country was running at its highest rate in 16 years. It did not get there overnight. Further on the inflation front, this morning the Assistant Governor of the Reserve Bank of Australia, Malcolm Edey, highlighted the risk in a speech to the Committee for Economic Development in Australia. In that speech Mr Edey stated that for the Australian economy ‘the main domestic challenges are those of strong demand, tight capacity and inflationary pressures’. Mr Edey added the warning that the consumer price index’s annual figure ‘could spike to something close to four per cent next quarter’.

The threat of rising inflation, as I said before, has not arisen overnight. We have seen the emergence of data on rising inflationary pressures in the economy over some years now. The Reserve Bank Statement on monetary policy most recently projected ahead that this economy was in the likelihood of receiving inflation outcomes in 2008, 2009 and through to mid-2010 which would be at or above the projected Reserve Bank upper range of three per cent.

These mean that the government and the nation must act in concert in the fight against inflation. We, the government, are the first to concede that inflation cannot be controlled by all factors which lie within domestic policy. You have massive boosts to the terms of trade. That has an effect in terms of the amount of consumption which then flows around in the domestic Australian economy. Another causative factor of these inflationary pressures is what is happening with the drought in recent times.

But there are factors which are within the range of government policy, and they go to what we can do on the question of public demand, what we can do through budget policy, what we can do when it comes to boosting private savings, what we can do when it comes to inflation and what we can do when it comes to infrastructure as well as skills and participation in the economy. That is why the government has articulated a clear-cut strategy in its fight against inflation. Our five-point plan deals with, one, what do we do with the overall projection for the budget surplus; two, what do we do to boost private savings; three and four, what can we do to boost skills and infrastructure; and, five, increasing our overall workforce participation rate. This is a clear-cut plan for the future and is necessary if we are to confront the challenge of inflation.

Part of the participation challenge lies with what we do in industrial relations to ensure that we have a flexible system which is both fair for working people and flexible for employers. That is why we believe in having an industrial relations system which gets the balance right, an industrial relations system which says to working families, ‘Here is a fair outcome for working families,’ and says to employers, ‘Here are a flexible set of arrangements which enable you to build your businesses into the future,’ and overall to enhance participation in the economy and long-term productivity growth. We know on this side of the House where we stand on industrial relations. Our position on industrial relations has been rock solid throughout the year leading up to the 2007 election. Everyone knows what we stood for. We would abolish Work Choices; we would abolish AWAs.

We have not seen so far parallel parity from those opposite. In fact, what we have seen from those opposite is an evolution of positions. We had the opposition leader telling us just after the election that Work Choices was dead. Then straight afterwards they unleashed the Senate to try and give Work Choices some mouth-to-mouth resuscitation, bring it back to life and make sure that our legislation in the Senate would be frustrated to the greatest extent possible. Now we have the third iteration, the third evolution, coming out of the party room today. As of today, Tuesday, I think Work Choices is off again. I think it has gone again, but I am not altogether clear and I would like some clarification from those opposite. We have had flip, flop and flap when it comes to the whole question of Work Choices and the future of AWAs. I gather we are up to the flap stage but I am all ears to hear what the current status of Liberal Party policy is formally on Work Choices and AWAs for the future.

If the Liberal Party is returned to office in the future, and whichever group within the Liberal Party happens to have assumed dominance by that stage, where will their industrial relations policy stand at that point? I know that the Leader of the Opposition’s chief of staff is gung-ho on this stuff; he comes from ACCI. I know that a whole lot of people are gung-ho on this stuff. So, once they get the chance, as happened before the 2004 election, whatever is said before the election, we know one thing for certain: what they say before the election they will turn turtle on after the election. We have got flip, flop, flap now on Work Choices. If they return to office, the guarantee is that we will have another extreme, hardline approach to industrial relations, because the party opposite has lost its way and lost touch altogether with working families.

Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

My question is addressed to the Treasurer and again concerns the relationship between inflation and jobs. Is the Treasurer aware that, over the last five years, the unemployment rate in Queensland has fallen from seven to 3.4 per cent and in Western Australia from 6.1 to 3.3 per cent, compared to very much lower declines elsewhere, including in New South Wales and Victoria? Given that the export-driven mining industry in Western Australia and Queensland is not likely to be materially affected by domestic interest rate rises, how will you ensure that your fight against inflation will not have a very uneven impact, with a heavy cost in jobs outside of Queensland and Western Australia?

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

I thank the member for his question because it is true—it is absolutely true—that the participation rate in Queensland and Western Australia has increased substantially. The participation rate has increased and the unemployment rate has gone down—and isn’t it a fantastic thing that the participation rate in Queensland and Western Australia has upped substantially and that unemployment is down? And one of the reasons why this has occurred is that people have gone back into the workforce.

Opposition Members:

Opposition members interjecting—

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

Absolutely—people in those states have gone back into the workforce, and what that has done is enhance the labour supply in those states, and that is very good for a lot of people. There are members all around here who will have older women or older men in their electorates who are back in the workforce for the first time in a long time because the participation rate has increased in those states. At the very core of our plan to lift productivity in this economy, to combat inflation, is to lift workforce participation. That is one of the reasons why we are so supportive of the income-tax cuts which we have argued for for a long period of time, because people on modest wages do deserve some incentive. Particularly when it comes to second-income earners, we have to design an income taxation system and a transfer system which gives them incentives when they go back to work. So not only is it older workers—

Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order. I asked the Treasurer a very important question about the differential impact of anti-inflation measures across Australia. He has not responded to that at all. He has not addressed it at all.

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

The honourable member will resume his seat. The Treasurer has the call.

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

Yesterday, the shadow Treasurer wanted to engage in some sort of arid debate about NAIRU. And what we have today is a repeat of the stupidity of yesterday from the shadow Treasurer. This is what the former governor of the Reserve Bank, Mr Macfarlane, had to say about what the shadow Treasurer was saying yesterday—

Opposition Members:

Opposition members interjecting—

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

Listen for a second. Let’s just listen to what the former Governor of the Reserve Bank had to say about the proposition that was put by the shadow Treasurer yesterday. He said:

I do not think it is a particularly useful construct. I do not think I have ever heard it mentioned in the Reserve Bank boardroom.

The NAIRU has never been mentioned in the Reserve Bank boardroom. And there is a reason for that: it is not used in practical economics.

Malcolm Turnbull (Wentworth, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order going to relevance. He is now endeavouring to answer the question he could not answer yesterday. He’s got to answer the question I asked today.

Opposition Members:

Opposition members interjecting—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

In giving the Treasurer the call I would remind him that he should be responding to today’s question.

Opposition Members:

Opposition members interjecting—

Roger Price (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order. We at the back here are having great difficulty in hearing the answer from the Treasurer.

Opposition Members:

Opposition members interjecting—

Harry Jenkins (Speaker) Share this | Link to this | Hansard source

I’m at the front and I’m having difficulty. The House will come to order.

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

The reforms that are required to ensure that we have strong growth across the whole of this country, but most particularly in Western Australia and Queensland, are precisely the reforms that go to the core of the Rudd government’s five-point plan. And it has been the complacency of those opposite over a long period of time, when it came to investment in skills, when it came to their failure to deal with infrastructure bottlenecks, that has put upward pressure on inflation and made it harder in all states of Australia, but most particularly in those states, to have strong growth with low inflation.

So the answer to the question is a very simple one: put in place a raft of reforms that lift productivity, lift economic growth and put downward pressure on inflation. And that is what our reform of federal-state relations is all about. That is what the Deputy Prime Minister is talking about when she is talking about investing in skills. That is what the minister for infrastructure is talking about: things that those opposite could not do for 11 long years. So if you cannot be part of the solution, you certainly will never ever be fit to govern this country.