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

My question is to the Prime Minister. Why has the Prime Minister’s high-taxing budget failed to take any decisive action to deal with grocery, petrol and mortgage stress on Australian households?

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

I thank the Leader of the Opposition for his question. This budget is anchored in economic responsibility. This government believes that the first responsibility of government is to ensure macroeconomic stability. In our current economic environment, that means producing a fiscal policy which delivers effective downward pressure on inflation, which in turn flows onto downward pressure on interest rates. The reason we have had to do that is that we have had 12 successive interest rate rises in a row, and we have had this on the back of not just a lax fiscal policy on the part of those opposite but a failure to act on the other fires which fuel inflation; that is, the supply-side constraints in the economy—namely, a skills shortage and infrastructure bottlenecks. These have been the subject of 20 consecutive warnings by the Reserve Bank of Australia to the previous government which resulted in no action.

So what we have done, given the circumstances we have inherited, is to produce a responsible budget with a surplus of $21.7 billion—the biggest surplus in nearly a decade; the second largest surplus as a percentage of GDP in 35 years—to assist in the overall policy settings which are brought to bear on interest rates policy. That is the responsible course of action.

The second thing that we have done through this budget is to ensure that, for working families who are under financial pressure—and they are, whether it is through rents, increased mortgage prices or the impact of groceries or fuel—we deliver a series of tax undertakings, a series of measures on childcare tax rebates, a new education tax refund and further measures on housing affordability. When you put them together, these add to a significant additional benefit for many working families across the country. It is the aggregation of these price pressures on working families on which the government has been keen to act.

This has been an absolutely essential focus of what the government has sought to do, but there is a third focus in the government’s overall strategy, and it is this: we also see, through this budget, an important opportunity for nation building which also dovetails with the important fight against inflation and further upward pressure on interest rates. That means dealing effectively with the long-term challenges we face with the skills shortage and infrastructure bottlenecks. The previous government had 12 years in office to act on these constraints and did nothing. They were warned on 20 separate occasions by the Reserve Bank of Australia to act; otherwise, there would be consequences for the overall inflation equation. They failed to act. This government, by contrast, within its first five months in office has decided to act. We have done so by establishing three investment funds for the future—on infrastructure, on skills and also in the critical area of building a better hospital system.

This government is proud of the budget, which is framed in terms of economic responsibility; of assisting working families under pressure who are dealing with cost rises from groceries, fuel and elsewhere; and, importantly, of investing in the future. This stands in stark contrast to the budgets we have inherited from the previous 12 years.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister inform the House of the importance of this week’s budget to the future of the nation and to the future of working families?

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

The important thing about this budget is that we have not only produced a document of responsible economic management but, unapologetically, decided to tip the scales in the direction of working families. This is absolutely critical for those people who are suffering cost of living pressures right across Australia—working families, working Australians, retired Australians—those who are doing it tough at present. The first challenge however is to produce a responsible budget, not one galloping ahead with out-of-control expenditure growth but one which actually puts itself within respectable fiscal parameters.

This $21.7 billion surplus is a significant investment in the future but it is being delivered on the basis of hard work—as the finance minister indicated yesterday—$7.3 billion in savings involving $5.3 billion of spending cuts. Where were the spending cuts and savings measures in previous budgets brought forward by those opposite? I do not recall. We see those measures detailed in page after page of the budget papers brought down by the Treasurer the other night and an overall expenditure growth. The fact that we can deliver an outcome for the budget which produces an increase in real expenditure by barely one per cent, against the 4.5 per cent real expenditure increases delivered by the smiling member for Higgins in recent budgets, frankly, I think, stands in stark contrast to the fiscal record that we inherited.

On the expenditure side, it is worth emphasising this point: we have produced an outcome on expenditure in this budget whereby expenditure as a percentage of gross domestic product now ranks as the lowest that has been produced by any government since 1989-90. That is a significant measure. On the other measure which is relevant to the overall size, effectiveness and efficiency of government—that is, tax as a proportion of GDP—we have reduced tax as a proportion of GDP from 24.7 per cent, which was in the budget we inherited, down to 23.8 per cent. That is a significant advance. The investment funds for the future indicate the way in which we want to build the nation into the 21st century. The money involved in those investment funds is not our money, it is not the Liberal Party’s money and it was not Peter Costello’s money; it is the Australian people’s money.

The Australian people want that money invested long term in fixing urban congestion; in dealing with the infrastructure crisis and bottlenecks which are confronting many of our citizens today; in improving the state of our public hospitals; in our universities so the kids studying there do not have to crowd into lecture or tutorial halls; and in the TAFE schools and colleges of this country to ensure they are of a 21st century standard and not that of a different age or era. Most importantly in the measures contained in this budget, we have been about the business of tipping the balance in the direction of working families—$47 billion of tax relief over the next four years is directed to low- and middle-income earners. We have also of course increased the childcare tax rebate from 30 to 50 per cent.

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

Mr Speaker, I rise on a point of order. Why are prepared ministerial statements being used in question time? It is not fair.

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

Order! There is no point of order.

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

Families across the country are dealing with real challenges, so we make no apology—while those opposite giggle and guffaw about the financial pressures faced by families today—for delivering $47 billion of tax cuts to those families, no apology for ensuring that we deliver an education tax refund of $4.4 billion, no apology for ensuring that we increase the childcare tax rebate by $1.6 billion from 30 per cent to 50 per cent and on top of that deliver a housing affordability package of $2.2 billion. These are practical measures which deliver to the bottom line of working families and we are proud of what we have done in unapologetically tipping the balance in their direction.

The contrast between what we have done and what those opposite have done stands in absolute stark contrast. Those opposite have advanced three propositions in the course of this budget debate: (1) that the inflation challenge facing Australia is a charade and a fairytale, (2) they have argued that there is no economic case for cuts in government spending and (3) they refuse to support effective measures concerning welfare reform. We find ourselves in a situation today where the Labor government of Australia is now being attacked from the left by the big-spending Liberal government of the past on these critical measures of economic competence and performance. Furthermore, when it comes to issues of social policy, we now find ourselves being attacked from the libertarian left of the Liberal Party who say that we should not intervene when it comes to binge drinking and the proper treatment of RTDs. I find it remarkable that we have a Liberal Party today which has lost its way, lost its direction and bears no resemblance to the great party of Menzies of the past.