Yvette D'Ath (Petrie, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister update the House on the economic challenges the government faces and the government’s policy response to those challenges?

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

I thank the member for Petrie for her question. The government’s challenge is to build a modern Australia that is capable of facing the challenges of the future and, within that framework, for us to have a modern, competitive economy which is capable of dealing with threats to our long-term prosperity. Right across the developed world at present we face challenges when it comes to projections for economic growth for the year ahead. We have seen already in the sobering report from the IMF, contained in its World Economic Outlook, the revision down of the growth projection for the global economy from 2007, when it was to render an outcome of about 4.9, down to 4.1 for the year ahead, 2008. What has this been triggered by? A range of factors: instability in global financial markets, occasioned by the downturn in the US housing market, occasioned in turn by what we have seen with the US subprime crisis. And these developments have yet to fully wash through the entirety of global markets and the real global economy.

Here in Australia we face a treble challenge. One is to keep a very clear weather eye on these developments in the international economy, particularly the capacity of these developments to wash over the economies of East Asia, where 50 per cent of this nation’s trade occurs. The second thing is this: we must remain absolutely vigilant in the fight against inflation. Third, we must also prosecute a bold program of microeconomic reform to ensure that we can build long-term productivity growth so that this economy can be competitive in the long-term future, given the challenges we face.

The inflation challenge that we face is substantial. Firstly, this is the highest level of inflation this country has seen in 16 years. When we took over office from the Howard government we inherited a level of inflation higher than that which the Howard government inherited from the Keating government. Those members sitting opposite need to be very mindful of that fact. Secondly, those inflationary pressures have been building for a couple of years. Thirdly, look at the Reserve Bank’s Statement on Monetary Policy and their projections out, based on where the economy was standing in the final quarter last year—inflation numbers beyond the three per cent band through 2008, through 2009 and into the middle of 2010. These are substantial economic challenges, substantial challenges on the inflation front, and therefore demand a course of action.

When it comes, therefore, to the impact of these high levels of inflation, it has of course washed through to what we have seen in interest rates moves. We have had 11 consecutive interest rates rises. This has placed enormous pressure on working families, to the point where when this government took office from its predecessor they were (1) running inflation at the highest levels this country has seen in 16 years and (2) giving to working families interest rates which are the second highest in the developed world. That is what we received by virtue of our predecessors by way of an economic inheritance. The question of course is what to do about it. The legacy problem I have referred to, but the beginning of wisdom in terms of how you deal with the problem is to recognise that a problem exists—

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

Mr Speaker, I rise on a point of order relating to the abuse of question time by using it to make statements. Furthermore, I am terribly disappointed that he won’t give Swannie a go!

Anthony Albanese (Grayndler, Australian Labor Party, Leader of the House) Share this | Link to this | Hansard source

On the point of order, Mr Speaker: yesterday you indicated that it was appropriate that someone on this side of the House raise issues at the time if points of orders had been clearly used to disrupt the functioning of the House. That is clearly what is occurring with the member for O’Connor’s point of order. It was not a point of order, and I ask that you take action against him.

Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

Mr Speaker, further to the point of order: the Prime Minister himself said that he wanted fewer ministerial statements in question time and more ministerial statements after question time. We have accommodated those ministerial statements after question time. The member for O’Connor has a very good point: this is a prime ministerial statement about the economy. We deserve the right to have the opportunity to respond. We cannot do that in question time but we can do it through a debate on ministerial statements.

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

Hopefully, people have read overnight page 188 of House of Representatives Practice, about points of order. We are slowly getting to the point where we are dealing with things at the point in time. If people want disruption, you can have arguments over points of order all you like. Let us get a few things straight. The second part of the honourable member for O’Connor’s point of order was not a point of order and was disruptive. The other question that he raises is something that the House will have to come to grips with, because if you all went away and listened to yourselves today and last year you would have problems.

The question that was asked of the Prime Minister was in order. The answer that the Prime Minister is providing is in order. If the House has problems with the length of the answer, that might be something that the House would like to bring its mind to through the Procedure Committee or other avenues. It is a great risk for me to put this on the record in that you might consider time limits for questions, because I do not believe that is the way we should really go if we are fair dinkum about sitting down and thinking about question time and the way that it should operate.

The other observation I would make is that this early in the life of the government, whatever people believe is by way of ministerial statement or explaining the government’s position, it is all new. It would seem legitimate that, in the early stages, we have questions that ask the position of the government and that it is explained. I believe that later today we might see the proper use of a ministerial statement, where something that may have in the past been announced outside of the chamber will be exposed and introduced inside the chamber. If we take a collective deep breath and work towards improving the way in which this place operates especially at question time, reduce the number of points of order and get on with the proper operation of the House, I will try to assist that.

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

The fact that we in the parliament and the nation face is as follows: we have inflation running at 16-year highs and we currently have working families, as a consequence of that, paying the second highest interest rates in the world. That is the challenge that we face. That is the challenge we have inherited from our predecessors. The question arises as to what we now do about it.

The beginning of wisdom with this lies in recognising that you have a problem. The core challenge which remains unanswered in this debate is: do all members of this House recognise that we have a challenge in dealing with the inflation problem? If I listen carefully to those opposite in their recent contributions in the debate, I hear the member for Wentworth referring to the inflation problem as a fairytale; the member for Higgins, only six months ago, saying that the inflation rate was right where we wanted it; the Leader of the Opposition disputing the real relationship between inflationary movements and interest rates; and the good old Leader of the National Party giving the classic three-point National Party response to any problem: spend, spend, spend.

The core question that we face is: how do you deal with the inflation challenge that we have now inherited? We on our side of the parliament—the government—have articulated a five-point plan to deal with the budget surplus, with the encouragement of private savings, with the skills crisis, with infrastructure and with participation, all of which are critical elements in bringing the inflation genie back under control and boosting long-term productivity growth.

Part of the participation problem lies in having not only effective tax policy settings and effective welfare policy settings but also effective industrial relations policy settings. That is why we, the government, have put forward a fair and balanced industrial relations system for the future of this nation, embodied in the interim arrangements introduced by the Minister for Employment and Workplace Relations in the bill which is currently before the parliament and as reflected elsewhere in our policy. We on this side of the House have a clear-cut policy when it comes to industrial relations. Our opponents do not. In December they said that Work Choices was dead, in January they said it was back alive again, in February it was dead again—and still we seem to have a bit of a flutter, based on the statement by the Deputy Leader of the Opposition in terms of what may still happen in the Senate.

In particular, I draw to the attention of honourable members a statement made today by the good old member for Canning, who, when asked, ‘Wouldn’t AWAs be gone forever after five years?’ responded: ‘But anything could happen in five years, you know. You could have a different government after five years.’ Therein lies the point. Whereas they may say that Work Choices and AWAs are dead and buried or fluttering away there for a bit, the truth is that they lie in the back drawer and lie in the top drawer, ready to be taken out should the opposition assume office at the next election. You can just see it. There it is: Work Choices is dead one minute, back again, dead the next, then waiting for the next election. You can see them with the defibrillator prongs waiting to bring Work Choices back to life—zap, zap. On the day after the election, bang—it is back into life. No-one knows where the Liberal Party stand on industrial relations. They have not made up their own mind on this. They are a party that has lost touch and lost direction.

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

My question is addressed to the Treasurer. I refer to the comments from the Minister for Finance and Deregulation at the Press Club on 6 February when he said that he did not believe that there was a problem with respect to the states’ relative budget and debt positions. Given that state Labor government debt is projected to grow to $80 billion by 2011, does the Treasurer agree with his finance minister that this level of government debt is acceptable? Is the Treasurer seriously contending that a dollar spent by a state government has less impact on inflationary pressures than a dollar spent by the federal government?

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

I thank the member for his question. It is very important to understand that state government expenditure on critical economic infrastructure is a very important part of lifting the productive capacity of the economy. Those opposite do not seem to get it. They simply do not seem to understand the importance of critical economic infrastructure in this economy and, because of their failure to provide political and economic leadership in this area over 11 years, there are now inflationary pressures in the economy—elevated inflationary pressures, which have caused seven interest rate rises in the last three years alone. So we on this side of the House do understand the importance of critical economic infrastructure. It is absolutely essential that it goes in place if we are going to lift the productive capacity of our economy and put downward pressure on inflation and downward pressure on interest rates in the long term.

Why are we getting these questions today? Because they are so embarrassed about their complacency over the last 11 years and because their failure in infrastructure gives lie to any claim they have to economic competence. Of course, the other thing that gives lie to their claims of economic competence is the seven interest rate rises that this country has experienced in the last three years on the back of the highest elevated inflation in 16 years. That is the parting gift of the Liberal Party of Australia to the people of Australia. But we take the fight against inflation very seriously, which is why the Prime Minister has put forward his five-point plan.

I will quote an authority on infrastructure—this is from Governor Glenn Stevens to the Economics, Finance and Public Administration Committee on 21 February. He said:

Balance sheets of governments in this country, by and large, are in very good shape.

Opposition Members:

Opposition members interjecting—

He is referring to state governments as well.

They will not have any trouble borrowing money from the lenders of the world for a reasonable project.

How inflationary is that? I do not think it will feed directly into the consumer price index per se—end of story; end of argument.