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

My question is addressed to the Treasurer. I refer to his answer to my previous question and to the first page of the first chapter of Budget Paper No. 1, which states that the government’s forecast for inflation next year is 3.25 per cent. Has the government revised its inflation forecast up to 3.75 per cent, in line with the Prime Minister’s statement yesterday?

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

I have a copy of the budget papers as well. Isn’t he a clever boy?

Opposition Members:

Opposition members interjecting—

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

Order! The question has been asked.

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

We know that inflation at the moment is 4.2 per cent—the headline rate and the underlying rate. The underlying rate is the highest in 16 years—the legacy of those opposite. They will not put up their hands and accept any responsibility for creating this problem. As I said in the House yesterday, they expect the Australian people to believe that somehow inflationary pressures only began at 9 am on 26 November last year. They did not. They left a legacy of high inflation for this government to tackle. We are out there tackling it and they are trying to sabotage it.

Julie Collins (Franklin, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. Is the minister aware of any threats to the government’s policy of putting downward pressure on inflation and interest rates?

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

The government has handed down a tight budget with a $22 billion surplus with the primary objective of putting downward pressure on inflation and interest rates. Inflation is running at 4.2 per cent—the highest in 16 years—and interest rates have risen 10 times in the last few years. It is true that the government’s strategy is threatened—it is threatened in the Senate by the opposition. The opposition’s response to the government’s budget has been completely incoherent. The opposition have been entirely happy to complain about the effects of individual rising prices—whether of petrol, groceries or other things—but they refuse absolutely to engage in the debate about what the fiscal settings in this nation should be. They are content to express concern about the specifics of inflation but they refuse to say a single thing about the wider problem and they are endeavouring to nobble the government’s attempts to come to terms with the inflation problem in the Australian economy.

We have heard during the course of this year a variety of views expressed about the inflation problem by the opposition. First, we heard from the member for Wentworth that it was a ‘fairytale’ and then we heard that it was a ‘charade’ from the Leader of the Opposition. The Leader of the National Party at least was prepared to concede that there was an inflation problem, but, in true National Party style, his solution was to spend more money. At least he was honest! Then in more recent times the architect of these problems in the 2007 budget, the member for Higgins, said, ‘Don’t respond in an excessive way fiscally to the inflation problem.’ And, of course, Senator Minchin, the former Leader of the Government in the Senate and my predecessor as finance minister, suggested that blocking budget measures in the Senate would not have an impact on the surplus.

I have said in the chamber several times over the last few weeks that these activities by the opposition threaten to put upward pressure on inflation and interest rates, but it is important to underline the fact that there is another dimension to this issue. There is not just a short-term element to the wrecking activities of the opposition in the Senate on this because what they are doing also threatens to undermine the rebuilding of the nation’s infrastructure into the long term. They clearly do not understand the short-term impact of eroding the budget surplus on inflation and interest rates, but they also clearly do not realise where the budget surplus is to be invested.

You may recall, Mr Speaker, that the government announced in the budget that it would establish three separate infrastructure investments funds—the Building Australia Fund, the Education Investment Fund and the Health and Hospitals Fund—for the purpose of rebuilding the infrastructure of this nation, to boost the productivity of the Australian economy and to elevate our economic capacity into the longer term. The primary reason we have taken this step is that the Reserve Bank over the last few years on no fewer than 20 occasions warned the former government that capacity constraints on the Australian economy were contributing to pressures on inflation and interest rates. Australia needs to expand its economic capacity and productivity to put downward pressure on inflation and interest rates into the future as well and, incidentally, to reduce the urban congestion which is exacerbating the impact of high petrol prices on commuters in our major cities.

Money taken from the surplus by the activities of the opposition in the Senate is money that will not end up in these funds. It is money that will not be available to be invested in the nation’s universities, hospitals, roads, public transport and ports. These funds are headed towards long-term investment in the nation’s infrastructure and the erosion of the surplus by the opposition in the Senate will reduce those funds accordingly. Those people in the community who may be inclined to support the approach that the opposition is taking in the Senate should perhaps bear this in mind: the money that is being knocked off the surplus by the opposition’s activities in the Senate is money that could otherwise go to financing a major investment in public transport infrastructure in their area, an upgrade of a public hospital in their region or a new science wing at a university in their area. I urge the opposition to rethink their wrecking tactics in the Senate, to reconsider their refusal to engage in the wider economic debate in this country and to commit, along with the government, to investing in the future of this nation for the long-term prosperity of all Australians.

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

My question is to the Prime Minister. Prime Minister, can you confirm your statement yesterday that the government’s inflation forecast for the next financial year is 3.75 per cent?

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

As I said yesterday, we have inflation currently running at about 4.2 per cent, which is actually right. I think the key question, as touched on by the Treasurer before, is whether you think inflation is a problem or not. That is actually what is being debated here, and that is what is at stake. There is one side of politics which accepts that there is an inflation problem and there is another side of politics which says that it is a charade and a fairytale. The contrast is absolutely clear-cut. We are acting on the inflation challenge; those opposite are ignoring it.