Brett Raguse (Forde, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Small Business, Independent Contractors and the Service Economy. What would be the impacts on small business of the Senate failing to pass the government’s budget measures?

Craig Emerson (Rankin, Australian Labor Party, Minister Assisting the Finance Minister on Deregulation) Share this | Link to this | Hansard source

I thank the member for Forde for his question. He is in a neighbouring seat to my seat of Rankin and he has also been a very successful small businessman. As a former successful small businessman, the member for Forde, all members on this side of the House and, I hope, members on the other side of the House, understand that high interest rates are harmful to the prospects of small business.

The economic situation that prevailed at the time of the change of government was essentially this: there was a lot of spending going on in the economy and it was crashing up against capacity constraints—that is, the capacity of the Australian economy to supply that spending. In response to that situation, the Rudd government brought down the May budget, which sought to do this: to ease those capacity constraints by investing in infrastructure and by investing in skills creation, and also to reduce the call on spending. If we can reduce the call on spending, we can reduce the inflationary pressures. A government can do that through a budget by cutting government spending and building a strong surplus.

What did in fact the budget do? It cut government spending from unsustainable growth of five per cent per annum—to be precise, 5.2 per cent per annum—under the previous government to just over one per cent per annum, and it built a very strong surplus of $22 billion, which is the second biggest surplus in 37 years. The purpose of this is to reduce the pressure on inflation by reducing the call of the government on spending and the capacity of the economy to supply it. That all makes good economic sense and it was necessary because we did inherit, whether the opposition likes it or not, the highest underlying inflation rate in 16 years. The inflation-targeting Reserve Bank was obliged to increase interest rates not once, not twice, but 10 times—10 times—under the coalition government. So concerned was it with the inflationary situation that it had to increase interest rates 10 times.

We are now doing what a smart and responsible government would do, and that is reducing the pressure on government spending and therefore reducing pressure on inflation and pressure on interest rates. But what is the coalition’s response? Cheap political opportunism. In the Senate, the coalition is refusing to pass very important parts of this federal budget and in doing so it is jeopardising the prospects of small business, because an inflation-targeting Reserve Bank is going to say in these circumstances that, if there is no reduction in inflationary pressures, it will be in a position where it will not necessarily be able to provide the interest rate relief that the constituents and the small businesses in Forde and all parts of Australia desperately need. Small businesses would be the victims of the political opportunism of the coalition. I note what the shadow small business minister said, and I am afraid I am going to have to read it out. It is very short. He said, ‘We certainly won’t be doing anything to jeopardise the government’s financial position.’ You will not be doing anything to jeopardise the government’s financial position? You are blocking key parts of the budget. That statement was made on 19 August. It did not last two days. Most of the commitments of this coalition do not last to the end of the day. The government is acting responsibly; the coalition is acting irresponsibly.

But the damage to small business from the coalition’s opportunism does not stop there. Why? Because we heard from the member for Stirling yesterday, who was complaining about the creation of what he calls slush funds through the Council of Australian Governments. The minister for finance and I are co-chairing one of the seven working groups which are dedicated to the task of reducing red tape in 27 different areas of business regulation. What we are seeking to do is to reverse the damage done to small business and other businesses from what the Business Council of Australia has described in a recent report as the ‘creeping reregulation of business’ which occurred under the coalition, and I quote this: ‘an example of how the benefits of past reforms can be quietly eroded over time, over 12 years through the creeping reregulation of Australian business.’ The Prime Minister and the Rudd government have embarked on an ambitious program of reducing business regulation in 27 areas, and what is it described as? A slush fund. We are trying to create a seamless national economy—an open, competitive economy. You are supposed to be the Liberal Party in support of free enterprise, in support of openness and competition. You criticise our budget, you try to block key elements of the budget and you describe the COAG business regulation reform process as the creation of a slush fund. The coalition is engaging in rank political opportunism, while the Rudd Labor government are creating a strong economy for the future of all businesses in Australia, including the 1.9 million small businesses we are proud to represent.

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

Before giving the Deputy Leader of the Opposition the call, I remind the minister—this is, amazingly, prompted by the member for O’Connor, because the member for O’Connor knew that some of the remarks were giving me difficulty—that he should address his remarks through the chair.