Mike Symon (Deakin, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. What steps is the government taking to cut back on wasteful government spending? Will the minister explain why spending discipline and addressing the inflation challenge is important for Australian families?

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Underlying inflation is currently running at 3.6 per cent in Australia. We have had 11 interest rate increases in a row after 20 Reserve Bank warnings over the preceding two or three years about the threats of inflation.

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

Mr Hockey interjecting

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

Order! I will be very generous to the member for North Sydney. This is a final warning. He has interjected on every question today.

Dick Adams (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

Throw him out!

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

The member for Lyons is not helping.

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Underlying inflation is running at 3.6 per cent, the highest rate for 16 years. We have had 11 interest rate increases in a row and government spending for the current financial year, and the projections from the previous government, is running at a 4½ per cent real increase. The rate of increase is way too fast.

The Rudd government is committed to cutting into government spending to get it back in line with appropriate fiscal settings to ensure that the budget is putting downward pressure on inflation and interest rates. That involves taking tough, challenging decisions. We faced the first instalment of this requirement a couple of weeks ago. When we were confronted with choices about the former government’s announcements that were made after the budget last year, a whole variety of spending initiatives were wrapped up in the Mid-Year Economic and Fiscal Outlook papers. There were 220 spending decisions.

We went through all of those spending decisions. Some of them were entirely legitimate and some of them were the ordinary business of government, but many of them were a substantial part of John Howard’s pre-election shopping list. As a result, we cut $643 million of government spending over four years and, particularly, for the forthcoming financial year we cut $265 million of government spending. That is just a modest first instalment. We accept that, because the real action, the big action, is going to be in the budget. We could not duck or avoid these decisions because we had to legislate on those measures, and that legislation is to be passed by the House today.

Some of the measures that we cut included significant government advertising spending. I advised the House yesterday of the outrageous amount of money—$457 million—that was spent by the previous government over the last 16 months it was in office. Some of those things were government advertising and some were specific programs. It was notable that straight out of the blocks in responding to these initiatives we had none other than the new Leader of the National Party. He immediately responded, and here is what he said in his press conference in the wake of these cuts being announced. He described the removal of $3 million of funding to the Fishing Hall of Fame as ‘absolute rubbish’. He said, and I quote, ‘We do not have a shortage of money in Australia.’ In other words, money grows on trees and the trees are in bloom so we do not really have a shortage of money in Australia.

He pointed out that the United States has a higher inflation rate than Australia but it is actually increasing government spending, clearly implying that the solution to any inflation problem is to increase government spending, not cut it. Finally he stated that cuts in government spending of the kind that we have projected will do nothing to reduce inflation. It is notable that in the last couple of days the opposition have placed a lot of emphasis on the question of technical economic knowledge. I would suggest that the little task force that they have beavering away somewhere in the bowels of the parliament should pay a visit to the Leader of the National Party’s office and give him a bit of a lesson about some technical economic concepts like the impact of public demand on inflation and the impact of government spending on the economy, because at the moment we have a Leader of the National Party who thinks that the big issue facing Australia is the prospect of cuts to the Fishing Hall of Fame. He thinks that there is plenty of money lying around, that there is no problem, that we do not have to worry about the rate of spending in our economy and that we do not have to worry about inflation or interest rates. He thinks that cutting government spending will have no impact on inflation and that the answer to inflationary problems and upward pressure on interest rates is to actually increase government spending. It is notable that there has been some speculation about the Liberal Party and the National Party merging. There has been speculation about a prospective merger of the two parties. Interestingly enough, the National Party cannot get a deal.

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

Mr Speaker, I rise on a point of order going to relevance.

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

I have a bit of a problem here: I am starting to have some sympathy for the member for North Sydney. I hope that the minister will be wrapping up his answer very quickly and not digressing too far.

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I will of course comply with your ruling, Mr Speaker. I was merely coming to the suggestion that, before any discussions of that kind might proceed, the Liberal Party might have a bit of discussion with the Leader of the National Party—given the Liberal Party’s new-found discovery of technical economic knowledge that it has been so pleased to parade before the parliament over the last couple of days—about some basic economic concepts. We on this side of the House, we in this government, understand the importance of cutting government spending to tackle the inflation problem.

Warren Truss (Wide Bay, National Party, Shadow Minister for Infrastructure and Transport and Local Government) Share this | Link to this | Hansard source

My question is to the Treasurer and it follows on from the answer just given by the Minister for Finance and Deregulation. Can the Treasurer explain why he believes the massive projected increases in state debt are not inflationary while at the same time he says that federal expenditure must be cut and the federal budget surplus must be increased to deal with inflation? Why is state government expenditure on infrastructure not inflationary but Australian government expenditure on infrastructure is inflationary?

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

I have a couple of concepts for him. The state general government sector have no net debt but it is true that their trading enterprises do have debt. They are out there investing in the future of the country—putting in place critical economic infrastructure to put downward pressure on inflation and downward pressure on interest rates. If they were not doing that, the country could not operate.