Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

With respect to the former member for Port Adelaide: I have always appreciated your contribution in the House.

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

Order! The member for Moreton has the call and he should not stretch it too far.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. How will the savings built into the budget assist with the fight against high inflation and interest rates? What would be the economic impact of rejecting those hard decisions and adopting a loser approach—I beg your pardon, a looser approach—to government spending?

Opposition Members:

Opposition members interjecting—

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

Order! The honourable member for Moreton should be careful in adding debate to his question. The question is in order.

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

I thank the member for Moreton for his question. Underlying inflation is currently running at 4.2 per cent in the Australian economy, which is well outside the Reserve Bank’s target zone. That is why the Reserve Bank has been engaged in putting up interest rates over the past six to nine months. One of the key reasons why inflation has been running at an unacceptably high level, of course, is that government spending has been running at an increasingly high level, growing much too fast. In fact, in the financial year that is about to end, the budget that we inherited from the former government had spending growing at over five per cent in real terms, pumping up spending in the economy without increasing the economic capacity that is needed to absorb the spending in productive activity.

The Rudd government inherited a loose, wasteful budget from the member for Higgins that is pushing up inflation and pushing up interest rates. Therefore, we have no choice but to slow government spending, to put the brakes on, in order to push back against rising prices and rising interest rates. That is why the government has delivered a surplus of $21.7 billion for the forthcoming financial year—1.8 per cent of GDP—slowed spending growth from around five per cent per annum in real terms to barely over one per cent per annum in real terms and reduced spending as a proportion of the total economy by over one per cent to the lowest level since 1989-90. That is why the government has put on the brakes: it is in order to put downward pressure on inflation and interest rates and to reverse the impact that the budget was having from the previous government’s fiscal settings of putting upward pressure on inflation and interest rates.

Inevitably, commentators have had different views about the budget. There have been one or two who have suggested that we have not gone hard enough. Many commentators have, however, suggested that, broadly, the settings are in the right place and the fiscal positioning is right to put downward pressure on inflation and interest rates. I have not seen too many commentators, though, who have suggested that our settings are too strict—that they are too tight. Not many credible economic commentators have suggested that. There is, however, one set of participants in public debate who have suggested that our settings are too tight, that they should be looser and that we should be spending more money—namely, the opposition, the Liberal Party.

And, I have to say, the member for Moreton got it in one. He was absolutely correct about this set of commentators—complete losers. Their position still is to pump up inflation, increase interest rates and pour money into the economy. They want to restore tax lurks. They want to revive the notorious Regional Partnerships program. They want to bring back the failed $1 billion access card project. They want to hand out various tax reductions to all and sundry. But there is one big flaw in this strategy—one big very simple flaw—where is the money coming from? Where is the money coming from to pay for all of the giveaways and all of the rejection of the government savings initiatives?

The combined impact of the position that the Liberal opposition have taken in response to the government’s budget would cut a hole of about $4 billion in this year’s budget and a total hole of over $22 billion over four years in the budget. And not a single cent of savings has been put forward by the shadow Treasurer, the member for Wentworth, by the shadow finance minister, the member for Dickson—we are not quite sure what he does in his day job; he is certainly not finding any savings—or indeed by the Leader of the Opposition. One commitment has not even been costed. The commitment to change the arrangements for capital gains tax on small business does not even have a costing, so unconcerned are the opposition about the impact of their fiscal position on the overall position of the budget.

The member for Wentworth confessed last week where the money was going to come from. He said it would come from the surplus. That is where the money for it would come from. That is a simple recipe for higher inflation and higher interest rates. Motorists know that the short-term effect of cutting the petrol excise could be blown away in a day’s oil price fluctuations. What they also need to recognise is that the short-term effect of that would be blown away by the increase in inflation, by the increase in prices generally and by the increase in interest rates that would follow from the loosening of the budget that the opposition is proposing. It would be a false saving for Australian families because it is not funded, it is not paid for and, inevitably, it has to come from somewhere and the opposition refuses to say where. It is not that long ago since the Leader of the Opposition and the member for Wentworth were members of the Howard government cabinet that rejected the very proposition that the Leader of the Opposition now advances. So, after 11½ years of opportunity to put this policy in place, they now suddenly discover it is a good idea.

In conclusion, the opposition’s economic approach is very simple: spend, spend again and spend yet again. It is to let inflation rip, let interest rates increase and put further burdens on the budgets of ordinary working people in this country. It is to have giveaways to everybody that they think needs to have some kind of political approach made to them, and to let the pressure on inflation and on interest rates that their budget, which we inherited, was delivering actually increase rather than be turned around. That is the approach that caused the problem that we are endeavouring to deal with in the first place. A grab bag of giveaways is not an economic policy. The Rudd government is committed to responsible economic management, to investing for the long term and to protecting working people’s living standards for the long-term future of this country.