Brendan Nelson (Bradfield, Liberal Party, Leader of the Opposition) Share this | Link to this | Hansard source

My question is to the Prime Minister. I refer the Prime Minister to the minutes of the last Reserve Bank board meeting, which reveal that the bank contemplated putting up interest rates by half a per cent and that it is concerned about a wages break-out. What is the Prime Minister’s plan for preventing a wages break-out leading to higher inflation and higher interest rates for Australian families?

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

I thank the honourable member for his question. The challenge that we face this year is: how do we handle the overall inflationary problem which has been left to us by the previous government?

Opposition Members:

Opposition members interjecting—

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

Whereas our friends opposite may find that difficult medicine to swallow publicly, it is simply the statistical reality that they have to get used to. It is not our say-so; it is the ABS’s say-so. But let us go to the question of wage restraint, which was the core part of the Leader of the Opposition’s question. The first thing we can do, and that we can do nationally, is to show some leadership. I am pleased about the fact that members on my side of the House, supported by the opposition, have decided in a modest way to demonstrate an appropriate level of restraint on our part, modest though it is, for the first year and a half—from now through until the middle of next year. That is important, particularly when we are confronted with statement after statement, report after report, by CEOs across the country, where unfortunately restraint has not been the first order of business for them when it comes to their own salary arrangements for the future.

The second element goes to how we best deliver also on this government’s pre-election commitments when it comes to tax cuts. There has been a lot of debate about this. We on this side of the House take seriously our commitments to working people. Were we to take the advice of some and not deliver those commitments to working people, the argument that would be advanced right across the country in the various industrial negotiations that would subsequently occur would be extraordinary—namely, that the absence of the tax cuts which have been promised to working families would not provide a basis for restraint in the subsequent wages demands. We therefore regard that as an important measure in moderating overall demand in the economy, in particular when it comes to demands by those who will be engaging in industrial negotiations this year. That is the second point.

The third point is: what do we do about the overall inflationary challenge when it comes to public demand? That is where this government has laid squarely the challenge to those opposite: do you believe that we need to rein in government expenditure—the Minister for Finance and Deregulation asked this very clearly yesterday—or do you not? We believe you do because it is the aggregation of private demand and public demand which creates the fundamentals of the overall inflation challenge. We have a plan of action on both fronts in order to do what we can to ensure that the inflation problem is kept under control. It is a problem which we inherited from those who preceded us, and we have the course of action underway that I just outlined to the honourable member.