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

I have received a letter from the honourable Leader of the Opposition proposing that a definite matter of public importance be submitted to the House for discussion, namely:

The Government’s failure to give Australians confidence that they have an effective plan for managing a $1.1 trillion economy.

I call upon those members who approve of the proposed discussion to rise in their places.

More than the number of members required by the standing orders having risen in their places—

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

At the heart of everything in terms of Australia’s prosperity and security and the confidence Australians can have in their future and that of their families is the Australian economy. There is nothing more important. The Treasurer, in the 14 press conferences and interviews that he has done on the economy, has used the phrase ‘previous government’ on no less than 51 occasions. When he has done that, he has done so to criticise the economic record of the previous government and the economy which he and his Prime Minister inherited in late November 2007.

It is very important that Australians be reminded of the economy that was given to the incoming government late last year. The first point is that when there was a change of government last, in 1996, the previous government inherited a $96 billion debt. Today’s government has inherited not only no debt but more than $60 billion invested in funds for Australia’s future. The previous government came to office in its first year with a $10 billion deficit—not an $18 billion surplus that will be delivered by the economy itself. Over 11½ years of the previous government there was continuous growth in the Australian economy, growth which exceeded that of the OECD countries and most of the developed nations throughout the world. Home loan interest rates, which are a significant concern to millions of Australians and Australian families, under the previous government were lower at every time than they were under the previous Labor government. In fact, they averaged 5½ percentage points less than under the previous government. Unemployment, the single biggest lifetime cause of poverty, plummeted from 8.2 to 4.3 per cent—almost by a half—and the number of long-term unemployed dropped from just under 200,000 to 69,000.

All Labor’s debt has been repaid. All of the things done by the previous government to repay that debt, and which had been opposed by the Labor Party in opposition, now save the new government $8.8 billion a year. Every year, as a result of Labor’s debt having been paid off, the Labor government and the Treasurer have nearly $9 billion available to them which they would not have had. In six of the last eight budgets of the previous government, income tax was cut. At the moment, and for the foreseeable future, 80 per cent of Australians pay no more than 30c in the dollar in income tax. We also had, under the previous government, the lowest level of industrial disputation ever recorded in close to a century. We also had inflation running at an average of 2½ per cent. The independent Reserve Bank of Australia, given the task of keeping inflation between two and three per cent, averaged inflation over the life of the previous government at 2½ per cent.

The economy that the Treasurer now seeks to talk down, the economy which the Treasurer bemoans inheriting, was described recently by the Economist magazine as ‘the wonder down under’ and ‘the envy of Western countries’. In fact, the Financial Times recently described Australia’s economy as, ‘Lucky Australia. The economy receives an almost spotless record card.’ I wish to correct the Financial Times. There was no luck involved. There were a lot of very hard decisions made by the previous government and by the previous Treasurer, who was very competent. Very important and difficult decisions were made, almost all of which were opposed by the now Treasurer and the Labor Party, which was then in opposition.

The economic management of Australia over the last 11½ years is such that we saw Australia and Australian families through with their mortgages, their car loans and their credit card debts. In government, we saw Australians through the Asian financial crisis and the flight of capital out of South-East Asia in the late 1990s. We saw this country through the recession in the United States in 2001. We saw it through the tech wreck, we saw it through SARS and we saw it through terrorism and the September 11 attacks. We saw the Australian economy and Australian families through the highest oil prices that we have seen for decades. We also saw Australia through the worst drought in a century.

Since the election, however, things have changed. There was a change of government in late November last year. Australia has a new government and a new Treasurer, and we respect the decision of Australians. However, it is worth noting that we have had most significant market volatility. The All Ords has dropped by 11 percentage points since this government came to office. We have also had the Reserve Bank of Australia increase home interest rates by 25 basis points and, for the first time in more than a decade, we have had the banks increase interest rates themselves, giving Australians an average increase in interest rates of 40 basis points or $70 a month on the average mortgage. That is under the new Labor government. In its monthly business survey the National Australia Bank on 12 February recorded the lowest level of business confidence since the September 11 terrorist attacks and the biggest six-month slump in a decade. So far, in less than three months under a Labor government, we have gone from a confident, prosperous Australia in sound economic hands with a very competent Treasurer to unprecedented, in recent times, market volatility, we have had a 40 basis point increase in interest rates with $70 a month on the average mortgage for the average Australian and we have had the National Australia Bank, along with the Australian Chamber of Commerce and Industry and the Commonwealth Bank, recording significant reductions in business confidence.

Over the next six to 12 months Australians will have every reason to be concerned about their future and the hands into which the Australian economy has gone. The government’s response to this has not been a response; it has not been a plan. Instead, we have had a slogan. We have had the mantra of a five-point plan. Because I sit here very close to the Prime Minister and the Treasurer, I observe that neither of them can get up and actually tell you about the five-point plan without referring to a piece of paper. The sixth point that should be in that plan, if it was a plan, is that of wage pressures, about which the Reserve Bank spoke considerably in its statement only two days ago. The challenge that must be put to the Treasurer and the Prime Minister of Australia is to prove to Australians that their workplace relations reforms will not put wage pressures on the Australian economy and further drive inflationary pressures.

It also needs to be explained by the Treasurer why he says, as part of his so-called five-point plan, that the government wishes to deliver a surplus of 1½ per cent of GDP, noting that the last three budget outcomes were 1½ per cent of GDP. In other words, without cutting a cent from government expenditure, that is what the economy is likely to deliver. He should explain to us why, if for example it is important for the Commonwealth to have no debt, as delivered by the previous government, and it is important for the Commonwealth to have surplus budgeting, we currently have $40 billion in state debt, which is headed to $80 billion over the next three years. I will be very interested to hear the Treasurer’s explanation for that.

As the shadow Treasurer, the member for Wentworth, asked today, as I am sure he will again very shortly: what is the Treasurer’s plan for dealing with an Australian economy where we have growth rates in Queensland and Western Australia, driven in no small way by the resources boom, of 6.3 per cent in Western Australia and 4.9 per cent in Queensland in the last financial year? In New South Wales, where I live, our economy is growing at 1.8 per cent. The Victorian economy is at 2.7 per cent and the South Australian economy is at less than one per cent. What is the Treasurer’s plan? At the same time, we see remarks being made by the Reserve Bank of Australia in relation to monetary policy and comments being made by the Treasurer which are ill informed at the least in relation to fiscal policy. What is the Treasurer’s plan for Australians, who are literally sweating on this, such that he will not club the Australian economy? We cannot afford to end up in a situation where the people of New South Wales, South Australia, Victoria and Tasmania find their economy is shrinking, find their jobs are disappearing, find their mortgages are getting more expensive and find small businesses are harder to run because of the decisions being made or not being made by the Australian Treasurer because he has no plan for this country. Australians sense it. They know that he is in the back room reading books on the economy. They know that he does not quite know the job, despite the fact he spent three years as the shadow Treasurer. There is a sense when he gets up to speak, whether in this parliament or in any other part of the country, that he does not actually know what he is talking about.

I say, on behalf of millions of Australians with home mortgages and car loans—of which I am one: we are relying on you. We need you to perform. We need you to understand the Australian economy. We need you to respect the fact that you, the Treasurer, and the Prime Minister have inherited a world-class economy. We need you to inspire confidence in our markets. Australians need the Treasurer of this country with great confidence and consummate knowledge to reassure them that their mortgages are in safe hands. That is absolutely essential. As of late last year, Australians decided to change the government, but they knew that Australia had been very well governed. They knew, most importantly, that their economy, their home loans, their car loans and their credit cards were in safe hands.

We had the unedifying sight last week of the Treasurer of Australia, who has a $1.1 trillion economy in his hands, saying: ‘The labour market is tight. It is the tightest it has been in a generation.’ He was asked, ‘What does that mean?’ He said: ‘It means it’s very tight. It means it’s low. That is what it means: very low.’ Yes, if you were watching a Monty Python film, it would be funny. But we were watching the Treasurer of Australia, with our $1 trillion economy and our mortgages in his hands, get up and say, ‘It’s tight; it’s very tight.’

Then, yesterday, we had the Treasurer of this nation, in response to a question, get up and say, ‘Sometimes I will have the details on hand and sometimes I will not.’ It depends on what day it is! Australians have to pay their mortgages every day and they have to have the detail right. They rely on the Treasurer of the country to make damn sure that he has the detail right. No Australian should lose his or her home because of incompetent management by the government of the day. This business about suggesting we had inflation out of control, as alleged and asserted by the Treasurer and the Prime Minister, is an absolute nonsense being perpetrated on innocent Australians.

It is also important for Australians to remember: okay, the Treasurer did not know what NAIRU is, but when Mark Skaife goes out there at the Clipsal 500 this week, I reckon he is going to know what the gauge in front of him means, he is going to know what it means for the performance of his car. Australia cannot afford to have a part-time Prime Minister who decides not to turn up with his ministers when the parliament is sitting and answer questions. That is bad enough. But, now, we have a Treasurer who may or may not have the detail, who does not know basic economic theory, let alone practice, and a Treasurer who cannot possibly give confidence to the Australian people. (Time expired)

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Before I call the Treasurer, can I point out that the Leader of the Opposition was heard in silence.

Mrs Bronwyn Bishop (Mackellar, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

That is because he had something worth while to say.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Mackellar has just returned from an hour outside. If she would like to spend 24 hours outside, she can do so. So I suggest she reflects upon that.

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

Wayne’s world!

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Order! The member for Fadden will remove himself under standing order 94A.

The member for Fadden then left the chamber.

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

I do welcome this debate today. It is an important debate. My message is very clear: the economy is strong, the nation is prosperous and the Commonwealth government is very, very optimistic about our future. And I have said that repeatedly in this House, but what I have also said is that this country faces two very big challenges. It is true we face the challenge of international market volatility—there is no doubt about that—and that has ramifications here and it has ramifications around the world. Everybody is aware of that. And everybody is aware that, as a consequence of that, there is slowing world growth, principally emanating from the US. But one of the things I am very optimistic about is that this may not necessarily have an impact on this country because of strong growth in the developing world. But it is a very big challenge.

The second big challenge that we face is the challenge of inflation. It is a very significant challenge for this country and it is one that we take very seriously. We do take very seriously the fact that we have the highest underlying rate of inflation in 16 years, precisely at the time that we have already had seven interest rate rises in three years. Now we face the highest underlying inflation in 16 years and, according to the Reserve Bank only a week or so ago, that underlying inflation will be at or above the target band for another two years.

This is a very big challenge for our country. We have not faced a challenge like this for a long period of time. But we do believe that by pulling together, by displaying foresight and patience and by seeking long-term solutions, not short-term solutions, we can achieve our objectives to pull that inflation down. It is absolutely critical for working families, who are under tremendous financial pressure, that we succeed in doing this.

Therefore, it is very important that all of our political leaders understand the magnitude of the problem. Unfortunately, the Leader of the Opposition and the shadow Treasurer do not understand the magnitude of the problem. We have even had the shadow Treasurer disputing the fact that underlying inflation is 3.6 per cent—denying that it is on the Reserve Bank website and going into some great hairsplitting exercise to try and deny the figure. The Leader of the Opposition has done a number of doorstops as well. He did a spectacular doorstop on 5 February. This is what he had to say, according to the Liberal Party website:

It’s very important that Mr Rudd and Mr Swan don’t engage in what they describe as the blame-game [inaudible].

Unfortunately for the Leader of the Opposition, there is actually a transcript of what he really said. What he really said was:

It’s very important that Mr Rudd and Mr Swan don’t engage in what they describe as the blame game, saying that it’s all the fault of inflation.

What else is driving interest rates if it is not inflation? This is extraordinary. He thinks that interest rate rises have nothing to do with inflation. That is like saying sunburn has got nothing to do with the sun. Do not come into this House and lecture people about economic literacy. This is one of the clangers of all time.

What is the Leader of the Opposition’s policy to fight inflation? Have we heard anything in this House in recent times from him that could in some way be a policy to fight inflation? If he puts out a document, I know what it will be: inaudible. We have not heard a squeak from the opposition of any plan which will cope with the inheritance they have left the Australian people. The highest elevated inflation in 16 years has been their parting gift to the people of Australia.

The opposition came into this House today and yesterday and somehow pretended that decisions of the Reserve Bank are not decisions taken by an independent body. Why is the Reserve Bank in the position that it is in at the moment? It is in the position it is in at the moment because of the opposition’s lax fiscal policy. They pushed all the weight over to the Reserve Bank and put all of the weight on the monetary policy. In the last four years, the former government had the highest increase in spending over any four-year period in the last 15 years. That is why Australia is in the position it is in at the moment. The Reserve Bank has been backed into a corner by lax fiscal policy and by the fact the previous government ignored 20 warnings from the Reserve Bank about the effect on the inflation rate of capacity constraints in the Australian economy.

What are those capacity constraints? They are the skills shortages. The former government left this country a huge skills crisis. At precisely the time the rest of the world was investing in skills and education, they took our investment down. The most damning thing that can be said about the Leader of the Opposition is that he was the education minister responsible for that. That shows you how little he understands about the key policy areas that drive the economy.

I will tell the Leader of the Opposition another thing: you cannot aspire to be first in prosperity, you cannot aspire to have continually improving living standards, if you are coming 16th or 25th in education. His legacy is a situation where we have not invested in skills and have not provided political leadership when it comes to infrastructure. That is why we have the highest elevated inflation in 16 years, something that the Leader of the Opposition wants to continually deny.

That brings us to the shadow Treasurer. The shadow Treasurer actually did have a few things to say about inflation. Contrary to his denial in the House today, he did say inflation was a fairy story. If we have got a shadow treasurer who cannot understand and does not even grasp the most basic fact that we have got elevated inflation, God help the opposition. I can understand that he might not have a great appreciation of what life is like around the kitchen table for most Australians. He is so far out of touch that he makes Peter Costello look like he is in touch. The shadow Treasurer is so out of touch he can go out and describe inflation as a fairy story.

The former government were out of touch. At precisely the time they should have been using the fruits of the mining boom to reinvest in the future, to invest in education, to invest in skills, to provide political leadership so we could have some First World infrastructure, they were having a party—and what a party it was. There it was the other night on Four Corners. The member for North Sydney was forced into the most humiliating admission that he was not told that Work Choices was going to make working families worse off.

The coalition have a hide to come in here and complain about whether people know a technical definition when the member for North Sydney sat in the cabinet room and passed a bill that ripped away the wages and working conditions from average working families. He then went on TV and said: ‘Oh, nobody told me. I’m only a minister.’ If you really want to see what went wrong in this country over the last three years, it is all there on Four Corners. The shadow Treasurer was there too, down at Quay Grand, wandering into the room when they were all having the meeting about the future of the Prime Minister, with a briefcase full of knives.

Peter Dutton (Dickson, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

Madam Deputy Speaker, I rise on a point of order in relation to relevance. This bloke has no idea about the Australian economy. If he does not know what he is talking about, he should not address the MPI.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

There is no point of order.

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

The member for Dickson should really be the last person to say that people do not know what they are talking about. What about you on the doors yesterday? You went out there and basically hit him in the face. You could not tell anyone what it was. You did not know, and that is the whole point.

Peter Dutton (Dickson, Liberal Party, Shadow Minister for Finance, Competition Policy and Deregulation) Share this | Link to this | Hansard source

Mr Dutton interjecting

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Dickson is warned!

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

What we have over there is a motley collection of people who do not stand for anything anymore. For the last three years they have argued that Work Choices was the solution to the economic challenges facing this country.

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Mr Keenan interjecting

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Stirling is warned!

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

We had the member for North Sydney in the House repeatedly claiming that it would lead to higher wages. He was simultaneously claiming in the House that our abolition of it would lead to higher wages as well, because what we had was simply voodoo economics. We are getting a lot more voodoo economics today from the opposition but no plan to tackle inflation.

The Leader of the Opposition said that our five-point plan does not have any substance, so let us go through what it really means—

Opposition Members:

Opposition members interjecting—

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

Absolutely. Let’s go through it. The most important thing that we are going to do in our five-point plan is show some restraint. We are going to pull back on public demand—the public demand that you let rip through your reckless spending—and that is why we are engaged in a very serious budget process. We have set the target.

Andrew Southcott (Boothby, Liberal Party, Shadow Minister for Employment Participation and Apprenticeships and Training) Share this | Link to this | Hansard source

Dr Southcott interjecting

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

That is right—at least 1½ per cent of GDP.

Andrew Southcott (Boothby, Liberal Party, Shadow Minister for Employment Participation and Apprenticeships and Training) Share this | Link to this | Hansard source

Dr Southcott interjecting

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

I would refer the member to his own budget papers. You were so ambitious that you put it at most at 1.2 per cent. The second thing is that we will allow the automatic stabilisers to work—something those on the other side would never do. One of the reasons the Reserve Bank has been backed into a corner is that you would not do that. You spent and you spent and you spent and you spent. That is what occurred. So we are going to show some restraint.

Another thing we are going to do is encourage private savings. We have put an instalment in with our First Home Saver Account—something that could not be done in 11 long years by those opposite. The other thing we are going to do is tackle the chronic skills shortage. It is always going to be left up to the Labor Party, as the protectors of the Australian workforce, to make the investments in the future for the workforce of tomorrow. That has always been the historical task of the Australian Labor Party, and we come to it with relish yet again. The record of the conservative parties is always to run down these essential investments which are so important to wealth creation and which go to the core of a modern productivity agenda. They have been completely missing. So is it any wonder that productivity hit the floor in recent years with the failure of the coalition to invest in the drivers of growth? That is why we are sitting here now, looking at the highest elevated inflation in 16 years.

That brings me to infrastructure. We have talked about it a lot in the House in recent days, and those opposite will be hearing a lot more about it. The coalition wanted to play the blame game when it came to infrastructure. They wanted to sit back; it had nothing to do with the Commonwealth government. Huge national projects were left to the states—nothing to do with them. What has been the consequence of that? Infrastructure bottlenecks—bottlenecks holding back export performance, bottlenecks clogging up our cities. We are proud to say that we will partner with the states to solve these problems. There will be no more short-term fixes like those we had from the Liberal Party. The Labor Party is going to look after the long term.

The Rudd government has got its eye on the long term. All those others there have got their eyes on each other. They cannot even look at each other. The shadow Treasurer was up in the gallery last night, handing out his forms about Work Choices and all those alternative plans. He has been spied already. All around the Sydney business community, people are saying: ‘Malcolm is going to do Brendan in soon. Malcolm is going to do him in soon.’ That is what the Sydney business community is saying. They are out there doing it.

Lastly, we are going to put in place measures to enhance labour force participation and labour force supply. These are important measures and are linked to the measures that we will put in place for skills and education. They are intimately linked with the education revolution. The one thing those on the other side of the House never recognised was that average working people deserve some incentive in the tax system. When they work hard, they deserve reward for effort—and they are going to get it from this government. We are committed to easing the pressures on working families. We are committed to fundamental reform, not only in tax but also in federal-state relations, because we understand that it is the long term that is important— (Time expired)

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

I am becoming increasingly concerned about the state of mind of the Treasurer.

An incident having occurred in the gallery—

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The gallery will desist.

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

Not only is he displaying a woeful ignorance of economic history and indeed economics but he is now suffering from delusions. He has just told the House that I was in the press galley last night when, in fact, I was in Sydney, addressing a gathering of my constituents. It is puzzling. I do not know who he thinks he saw, or whether he is becoming so anxious he is imagining I am there when I am not.

It is not just imagining people that is the Treasurer’s problem; he also repeatedly misstates and misrepresents economic history. For example, in his remarks just a moment ago he said that the Reserve Bank has had to put up interest rates because of the Commonwealth failing to run a responsible fiscal policy of its own. In other words, instead of the Commonwealth running the massive surpluses that it did—1.6 per cent of GDP last year, 1.5 per cent the year before, 1.5 per cent before that—the coalition government should presumably have run an even larger surplus, perhaps of two per cent or three per cent. Who knows? He does not stipulate a figure. But the sad thing for the Treasurer is that this claim is not borne out by anything said by the Reserve Bank. There has never been a statement by the Reserve Bank during the period of the Howard government to the effect that they would not have to put up interest rates if only the Commonwealth would run a larger surplus. That is a complete myth. That is as mythical as his view that I appeared in the press gallery last night.

Indeed, two distinguished Reserve Bank governors have said very authoritatively that monetary policy—and I am now quoting Governor Glenn Stevens when he was the deputy governor—is the most important determinant of long-run inflation performance. The former governor, Ian Macfarlane, in his Boyer lectures of 2006, said, ‘In the past 60 years, there has never been a period with a high rate of inflation that had not been supported by accommodating monetary policy. Similarly, there had never been a major fall in inflation without it being accompanied by a tightening of monetary policy.’ What the Reserve Bank has said about fiscal policy is that the strong and consistent surpluses that the government has run have contributed to financial stability in our system. The Treasurer’s myth about the Reserve Bank is just that. Indeed, what the Reserve Bank has said is completely at odds with what he has asserted.

Let us talk now about the really critical issues for Australians: inflation, interest rates and unemployment. Financial policy, monetary policy and fiscal policy are very difficult, because governments and central banks are bound by statute and good governance to manage and seek to achieve objectives which are in some senses competing with each other. We try to seek to maintain full employment but we want low inflation. We want price stability so that we can have low interest rates. And, to an extent, they conflict with each other. That is, indeed, at the very heart of the questions that the Treasurer has been utterly incapable of answering this week.

The question about the non-accelerating inflation rate of unemployment was not a trick question designed to see whether he knew what NAIRU was, although any other Treasurer would have known that. Certainly when the member for Higgins was the Treasurer he had no difficulty answering questions about it. But the term itself is not complicated, because it defines itself. What it speaks to is this: how low can employment go before you start to trigger inflation? That is the question. It is a vital question. We now have unemployment at a 35-year low of 4.1 per cent.

One of the great achievements in the Howard years was the ability to run this economy with very strong growth—the most recent numbers are around four per cent, although the bank is now forecasting that that will come off in line with global conditions—compared to our peers, very low unemployment and inflation through the cycle of between two per cent and three per cent. If you go back 10 years or even less than 10 years, many economists said then that you cannot have unemployment below seven per cent without triggering runaway inflation. In other words, they were saying that the NAIRU—the non-accelerating inflation rate of unemployment—is in the order of seven per cent. While it is not one of those statistics which you can be completely precise about, very few economists would say that it was materially more than five per cent. Most would say that it is somewhere in the four per cent range. People will contend about where it is. But the fact is that it has come down. What that means is that because of the strong economic management of the Howard government we can run an economy with stronger growth, manageable inflation and more Australians having jobs. At the same time, the participation rate is at an all-time high. That is delivering the key objective of economic management, which is sustainable prosperity for all Australians. That is what this is all about.

These questions about inflation and unemployment are ones that the Treasurer appears not to have been able to turn his mind to at all. He tried to get out of his difficulty, after his embarrassing period in question time a few days ago, by first suggesting that he had not answered the question because he did not want to nominate a specific number for the NAIRU. That did not wash, so his latest contrivance, which came out the following day, was to say that it was not really a very important statistic or concept anyway. And yet his own department thought it important enough to publish on its website a very insightful paper on the NAIRU as recently as December 2007.

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

Dr Steven Kennedy’s paper.

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

This is Steven Kennedy’s paper, as my colleagues have observed. Then we moved on to another really challenging question that again the Treasurer seems to have no interest in or is paying no attention to. We have very strong economic growth in Australia and we have very low unemployment. But, as the Leader of the Opposition pointed out and as I have been endeavouring to get the Treasurer to address during question time, it is by no means uniform. What we have seen is very strong economic growth in Queensland and Western Australia and very modest growth in Victoria, New South Wales and South Australia. Indeed, in Victoria, New South Wales and South Australia, the economic growth last year was significantly below the 10-year average. We have seen very dramatic falls in unemployment in Queensland and Western Australia, compared to very modest falls in the other states. What we have, on any view, is a two-speed economy. We have very strong growth, fuelled by external demand, in the mining states, and much more modest growth—indeed, very low growth; in South Australia, it was only 0.8 per cent in the last financial year—in the other states.

So a big challenge for economic policy and for a Treasurer is: how do you constrain inflation across the board, recognising that these inflationary pressures are in large measure being driven by the strong growth in the mining states, recognising that an increase in Australian domestic interest rates is not going to stop any of those huge mining projects going ahead in Queensland and WA, because they are being fuelled by external demand? There is a real risk that the blunt instrument of monetary policy, or indeed poorly executed fiscal policy, will have little effect in the boom states and flatten the economies in the other states. That central question is one to which the Treasurer refuses to turn his mind. He has no plan for this country’s economic future and no capacity to develop one, because he is not even prepared to consider the vital challenges that he faces.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

The Leader of the Opposition has lodged this matter of public importance about the so-called lack of an effective plan for managing the Australian economy. There is a certain irony about this matter of public importance, because the government which did not have a plan for Australia’s future was thrown out on 24 November. The government which did not have a plan to bring Australia’s level of investment in education and skills up to international standards was thrown out on 24 November. The government which did not have a plan to let Australians compete with the rest of the world on the basis of their skills and innovation was thrown out on 24 November.

The Australian people voted in a government with a plan for Australia’s future. The Australian people voted in a government willing and able to invest in skills, education and infrastructure. The only plan that the previous government had was called Work Choices, and the Australian people passed judgement on that plan on 24 November. Of course, the shadow cabinet also passed judgement on that plan this week and rolled the Leader of the Opposition and the Deputy Leader of the Opposition.

To cover up their lack of a plan in that election campaign, they developed a scare campaign. Remember the ads? ‘Seventy per cent union officials will ruin the country.’ Those terrible union officials! ‘Labor is anti business.’ That was their excuse for a plan—a scare campaign. Well, a scare campaign does not fix inflation. A scare campaign does not fix the bottlenecks in the supply chain of this country. A scare campaign does not put downward pressure on demand and interest rates. Only a plan will. They delivered a scare campaign; we delivered a plan.

We have a plan to compete on innovation and skills. They had a plan to cut wages and have a race to the bottom. We have a plan to increase productivity. They had a plan to slash working conditions. That is the essential difference between the two sides of the House. They did not develop a plan when the Reserve Bank gave them 20 warnings on the growing inflationary pressures. They did not develop a plan when the Reserve Bank warned that the economy was overheating. They did not develop a plan because they were not capable of it. Of course, they have not learned. They still do not have a plan. They are the alternative government of Australia.

Remember what the shadow Treasurer’s plan to fight inflation is? It is an oldie but a goodie. Remember his plan? ‘Ignore it and it shall go away.’ ‘Don’t talk about inflation because you’ll exacerbate inflationary tendencies.’ He has issued press releases saying, ‘The Treasurer is increasing inflationary pressure in Australia by talking about inflation.’ His plan is: ignore it and it will go away.

The Reserve Bank minutes came out yesterday. I am sure we all read them. We all know about them. What did they say when talking about their decision to increase interest rates? They said:

In debating this recommendation, members agreed that a key issue was that inflation had increased, and was running at a higher pace than had been expected prior to the release of the December quarter CPI. On a year-ended basis, CPI inflation would rise further in the March quarter.

I would expect that the shadow Treasurer last night penned a very strongly worded letter to the Governor of the Reserve Bank, complaining that he was increasing inflationary expectations in this country. Has the shadow Treasurer called each and every member of the Reserve Bank board to complain that they have been talking about inflation too much? Silence—he has not put in the call. Why didn’t you call, Malcolm? He has not put in the call and he has not penned the letter, because he is full of hollow words. All he can come up with is to say that the Treasurer of this country should not talk about inflation. When the Reserve Bank talks about inflation, we have deathly silence from the shadow Treasurer, because he does not want to get into a public spat with the Reserve Bank governor. He does not want to get into a spat with the Reserve Bank board. He has been caught out. He has been caught out saying we should stop talking about inflation, and what does the Reserve Bank do? It issues a warning: inflation is growing. The Treasurer says that the inflation genie is out of the bottle. The Reserve Bank comes out and says ‘inflation would rise further in the March quarter’. Deathly silence—he is not going to criticise the Reserve Bank because he does not want to be at war with the Reserve Bank. He does not want that; he just wants to be making cheap political points against the Treasurer of the country.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister Assisting the Shadow Minister for Immigration and Citizenship) Share this | Link to this | Hansard source

I rise on a point of order, Mr Second Deputy Speaker. There are forms of the House in which the member can ask the shadow Treasurer questions, as you would be aware. If he wishes to ask a question—

Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

Is that your point of order?

Christopher Pyne (Sturt, Liberal Party, Shadow Minister Assisting the Shadow Minister for Immigration and Citizenship) Share this | Link to this | Hansard source

he is entitled to do so and the shadow Treasurer, I am sure, is quite happy to respond.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Sturt will resume his seat. There is no point of order.

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

On the point of order, Mr Deputy Speaker: this is a deliberate tactic. This is the 20th point of order today.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

There is no point of order.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

They did not have a plan then and they do not have one now. Perhaps they did not have a plan because they did not think they had a problem. Remember what our old friend the member for Higgins said? ‘We’ve got inflation exactly where we want it.’ The old ghost of Christmas past in by-election alley up here—he thinks he had inflation right where he wanted it. They did not have a plan because they did not think they had a problem. They left us with the highest underlying inflation in 16 years, and that was exactly where the former Treasurer wanted it. I am glad about that! It is not where we want it, it is not where the Reserve Bank wants it and it is not where any objective, serious economic commentator on the future of this nation would want it.

Perhaps that is why they were happy to leave Australia’s investment in education at 5.8 per cent of GDP—17th in the OECD, behind Poland and Hungary. They did not care about the supply side. They did not care about the skills and education crises in this country because they had inflation right where they wanted it. Perhaps that is why they were happy not to invest in infrastructure. Perhaps that is why they were happy not to invest in preschool education and to leave Australia’s investment in preschool education at one-fifth of the OECD average. They did not care. They did not think they had a problem. They did not have the wit to come up with a solution. They were happy to oversee a reduction in investment in higher education in Australia of seven per cent when the OECD average was an increase of 48 per cent. That is what they were happy to do. We have an alternative approach. We do have a plan.

We hear a lot about reform under the Howard-Costello years and what great economic reformers they were. We hear it almost universally from that side of the House. We do not hear other people commenting on that. We hear a lot about what great economic managers they were. Well, let us hear a bit more about it. Let us hear Andrew Charlton, the respected economist, who said:

… in the 1980s and early 1990s the Australian economy was wholly transformed. In the late 1990s and early 2000s it was merely tinkered with. Howard and Costello have been coasting.

They were coasting on the miner’s back, happy to let the commodity boom increase demand in Australia but not happy to make the important, fundamental reforms to the Australian economy, not happy to invest in infrastructure and skills to put downward pressure on inflation, not happy to invest further in our future by racing to the top by competing in skills and innovation—just happy for a race to the bottom by cutting wages and by cutting working conditions.

What are the implications of their lack of reform? Eleven interest rate increases in a row. What is the real impact of this? As a Western Sydney MP, I will tell you the real impact: housing foreclosures doubled and people are losing their homes. That is the real legacy of their government. There are other members here who are seeing this day after day, just like I am, across the country. These people are entitled to know not only what the plan of the alternative Treasurer of this country is but what he thinks. They might get an insight. He will remember walking through the doors of the parliament after an increase in interest rates under the previous government. We remember. What did he have to say? What was his comment? ‘I think the interest rate hike has been overdramatised.’ He said that there was not a problem.

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

Who said that?

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

The member for Wentworth, the alternative Treasurer of Australia. The interest rate increase ‘has been overdramatised’! Well, the people in Western Sydney do not think it has been overdramatised. Eleven interest rate increases in a row means they are losing their homes in record numbers. This is his government’s legacy, the legacy of its lack of a plan. Those people do not think that we are being overdramatic when we say that we need to put in place a very conservative fiscal policy to put downward pressure on interest rates. They do not think that we are being overdramatic when we say that increasing government spending by 4.5 per cent a year needs to stop. They do not think we are being overdramatic when we say that we need to invest in infrastructure and skills to put downward pressure on interest rates by fixing the bottlenecks in the Australian economy, like the Reserve Bank asked the former government to do 20 times. (Time expired)

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

I am an observer of this parliament and I have observed four things today. First, I say to the member for Mitchell: the last time there was a crowd like this assembled for a maiden speech was for the speech of the member for Banks in 1990, when the first seven minutes of my maiden speech was drowned out by the applause for his maiden speech. I have not forgiven him yet! The second thing I observed today is that the Prime Minister of this country did not endorse his Treasurer at the table. The third is that the Assistant Treasurer just outshone the Treasurer. If you have two things going badly for you, you do not want be outshone by your assistant, and that is exactly what happened. The fourth thing I observed today—if I can just get this out without interruption—is that the shadow Treasurer outshone the Treasurer of the day, which must be embarrassing for the new Labor government.

The Treasurer said that they are the great protectors of the workers of this nation. I can tell you that, in my area, the paper and pulp producers, the power industry workers, the farmers and the working families voted Liberal. When the unionists down in my area were asked who they were going to vote for, 40 per cent of them said that they were going to vote for Russell Broadbent in McMillan and Peter McGauran in Gippsland, because the rhetoric that was coming from the Labor Party before this election campaign said very clearly, ‘You are expendable for our city votes.’ Take this on board, Assistant Treasurer. That is the truth. That is the rhetoric that came through to them. You can talk about that till the cows come home, but that was the case.

You have not got a plan. You have proved that you have not got a plan. There is no plan coming from the government. You said you had a plan before the election. The moment you were elected, there was no plan. You want us to give you a plan. As you did with the ‘me too’ before in the election campaign, you want us to give you a plan. You want 1,000 people to come here and give you a plan. What about the governance of the nation? You copied the Howard government’s policies. You have not got a plan to govern for a $1.1 trillion economy. The Australian people need confidence in the Treasurer, the Assistant Treasurer and all of those representing the Labor government in this place before they put their hard earned savings, their homes, their farms and their businesses in the hands of this new Labor government. Today, they have not got that confidence, as was proven by the Prime Minister himself.

Christopher Pyne (Sturt, Liberal Party, Shadow Minister Assisting the Shadow Minister for Immigration and Citizenship) Share this | Link to this | Hansard source

Mr Pyne interjecting

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

Would our minister at the table like to keep his mouth shut so I can get out what I need to say? The government has inherited one of the strongest, most robust economies in the world. Everybody in this House should recognise the expertise of the Howard government in the management of the economy over the last 11 years. The inheritance they have delivered to this new government is not only a robust economy but also the lowest unemployment in all of those years. Those who are my age or older will remember how high unemployment was in this nation. You all knew somebody who did not have a job. Now most of you do not know anyone who does not have a job. There are jobs and opportunities out there. The member for Newcastle spoke today about the loss of jobs in the steel industry and about the opportunity to get out and get a job. The former government have returned the most robust economy to any government ever; it has never happened before. Oh, the Kennett government delivered to the new government in Victoria a very large surplus, which it has now spent. The government, rather than inheriting a $6 billion deficit, has received a $15 billion credit to this nation. The stewardship of how it handles the economy is now to be tested. (Time expired)

Michael Danby (Melbourne Ports, Australian Labor Party) Share this | Link to this | Hansard source

Listen to the cheek of the contrived claims of the opposition about this side not having the confidence of the Australian people, just after the federal election when people made an emphatic choice that this side of the House has their confidence to run our $1.1 trillion economy. What fiscal irresponsibility when those opposite spent millions of dollars on advertising for Work Choices and hundreds of millions of dollars on regional rorts. Who can forget the Tumby Umby Creek that we spent millions of dollars clearing before it was subsequently cleared by rainfall? No wonder the excellent member for Grayndler, the Leader of the House, pointed out that we should be calling the National Audit Office ‘the Nationals Audit Office’. We ought to be going through every piece of expenditure of the previous government and seeing the gross irresponsibility in Work Choices, regional rorts and the fake technical colleges that were built around this country—the gross capital expenditure that was spent on them when they did not have any students.

Over the past few days the honourable member for Wentworth and the honourable member for Bradfield have sought to use this great forum in a cynical manner, asking questions of my colleague the Treasurer that do not address the economic issues that matter to ordinary Australians, using obscure formulas, such as NAIRU, which I understand the Governor of the Reserve Bank regards as surplus to requirements. The shadow Treasurer will no doubt accuse it of knowing nothing about monetary policy either. As ever, those opposite are doing nothing to either help or ease the growing burden of inflation impacting on ordinary people and their families. To deny that inflation as it currently stands is a problem—as the shadow Treasurer has said repeatedly—is something that I cannot believe.

On this side of the House we can only conclude that the member for Wentworth is more focused on a figure much closer to his heart, that of the Leader of the Opposition’s record-shattering nine per cent approval rating. Perhaps by understanding that inflation is being persistently forecast at the higher end, or exceeding the target band set by the Reserve Bank—as the member for Prospect has just explained—the Leader of the Opposition argues that lowering expectations should be taken more seriously. The member for Wentworth might be able to grasp the seriousness of the problem his party has unceremoniously dumped on working families.

The shadow Treasurer and his colleagues may in time even get through the first step on the road to fiscal policy rehabilitation. Hope is a wonderful thing. It is a feeling I commend to the House. Unlike those opposite, we are committed to dealing with the economic challenges facing Australia that the previous government washed its hands of after 11 long years, rather than revisionism writ large. Instead of the Costello cruise control, the Rudd government will, under the able management of the member for Lilley and the member for Melbourne, work to claw back the significant structural economic problems left virtually untouched by the Howard-Costello regime. Thanks in no small part to the previous government’s inaction, Australia is unique among large-scale exporters of minerals in maintaining not just a significant current account deficit but one that remains impervious to virtually unprecedented terms of trade as a result of the runaway expansion of China and the demand for our exports. With a current account deficit in the vicinity of $5 billion per month, the impact that such an imbalance has on both interest rates and a highly valued Australian dollar has helped to ensure not just that the inflation genie is out of the bottle but that it stays out.

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

Order! The time allotted for this discussion has now expired.