Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Prime Minister. Will the Prime Minister outline the importance of yesterday’s interest rates cut and today’s national accounts data?

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

I thank the honourable member for his question. Yesterday brought the first interest rate cut that Australian mortgage holders have had in nearly seven years. It has been a long time that they have had to wait for that. It was the first interest rate cut ever experienced by some 740,000 first home buyers. That, again, is an important fact to note. It has been a modest contribution to the cost-of-living pressures faced by working families, but for those 3.1 million Australian households with mortgages it represents a welcome development. For the average mortgage holder that means a saving of nearly $600 a year.

Today, through the national accounts data, we have an indication and evidence of solid growth for the Australian economy for the June quarter. This is particularly solid growth when you consider the international context in which we are operating. The Treasurer has just referred here to the international comparators for the first six months of the year, whereby the economies of Japan, Germany, France, Italy and the United Kingdom have either experienced negative growth in those quarters or experienced zero growth. For developing countries also in the June quarter, I draw the House’s attention to the fact that Hong Kong experienced negative growth of 1.4 per cent and Singapore of 1.5 per cent.

I would draw to honourable members’ attention—I notice the Deputy Leader of the Opposition finds negative growth around the world amusing—that the recent outlook document produced by the OECD for the global economy again contains some disturbing findings about the period which lies ahead. The OECD has noted that global growth is weak and said:

Financial market turmoil, housing market downturns and high commodity prices continue to bear down on global growth …

And, furthermore:

Continued financial turmoil appears to reflect increasingly signs of weakness in the real economy, itself partly a product of lower credit supply and asset prices.

That is the interim assessment of the economic outlook for OECD countries dated 2 September, yesterday.

Therefore, against these global circumstances, as reinforced by that OECD bulletin, this quarterly growth figure for Australia represents solid growth. When you look at the fact that that translates into annual growth of 2.7 per cent, we believe that this represents a reasonable performance against the difficult challenges which now present themselves to the Australian economy internationally. The other thing I would say is that it also represents a solid performance for the economy domestically, given the cumulative impact of 10 interest rate rises in a row on the part of those opposite, all of which serves to have an impact on the cumulative economic wellbeing of the country.

I said yesterday, and I say again today, however, that the state of the overall economy and the fact that we have had one interest rate cut, representing modest help for working families under financial pressure, mean that we still have much, much more to do when it comes to assisting those Australians. But, to put it into context, yesterday’s official rate cut put nearly $600 a year back into the wallets of families on average mortgages right across Australia. I would ask those opposite to contemplate one thing they are about to do in the Senate—that is, their Senate treatment of the Medicare levy surcharge.

Opposition Members:

Opposition members interjecting—

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

I would suggest to those opposite they listen very carefully to this. If they proceed with their tactic to block this in the Senate, what would be the impact for working families who have just, for the first time in seven years, had an interest rate cut which benefits them to the tune of $600 a year? Yesterday we had an interest rate cut which benefits working families on an average mortgage with $600 a year. For a family with two average income earners and a combined income of $120,000, the increase in the Medicare levy surcharge will save them $1,200 in tax. Yesterday, through the actions of the Reserve Bank in a 25 basis point reduction, we realised something like a $600 a year saving for working families with an average mortgage.

The action which those opposite are now contemplating in the Senate today has exactly the reverse effect. It is in fact a raid on the household budget of working families. For a family with two average incomes earning a combined income of $120,000, the increase in the Medicare levy surcharge will save them $1,200 in tax. So on Tuesday the RBA provides relief of nearly $600 for families on an average mortgage, and on Thursday the Liberal Party of Australia will take that back in spades. I challenge those opposite, who stand here and talk about the cost pressures facing working families. We had action yesterday by the Reserve Bank, modest in terms of its overall impact, but what the opposition are about to do in the Senate on the Medicare levy surcharge represents a slug on working families and I would suggest to those opposite that they do the right thing in the Senate and stand up for working families instead of providing an average slug of $1,200, which hits their family budget.

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

Mr Speaker, on a point of order, I request that the Prime Minister table those documents so we can all read that GDP is down 0.25 per cent.

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

Was the Prime Minister quoting from documents? Were the documents confidential?

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

Yes, they were.

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

My question is to the Prime Minister. I refer the Prime Minister to descriptions by the Economist magazine of the economy his government inherited as ‘a wonder down under’ and as ‘the envy of western countries’. I ask the Prime Minister: what would the rate of inflation and interest rates be today if the coalition government had spent rather than saved the surpluses accumulated since 1996?

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

One of the more curious questions asked yesterday, which I think is embedded somewhere in the question asked just now by the Leader of the Opposition, was whether you use surpluses on consumption or whether you use them on investment. That is a very critical distinction because those opposite, in the avalanche of cash which came in the back door off the back of the resources boom, chose to do primarily one thing with it, and that was to expend it on consumption. Look at the avalanche of informed criticism of that strategy by those opposite. I take for example Saul Eslake’s criticism over the last several years that, of the hundreds of billions of dollars in extra revenue received over multiple years by those opposite—and I paraphrase Saul Eslake here—he could not identify a single thing on which this previous government could hang its hat by way of long-term productive investment. The alternative is in fact to use the proceeds of the mining boom to invest in the future. I will quote here from the International Monetary Fund’s report of July 2008:

Saving some of the revenue from the commodity price boom in three new funds will take pressure off monetary policy in the near term...

The reduction in public spending growth in the latest budget illustrates the government’s commitment to help reduce inflation.

We have a strategy for the future. It is saying: here you have a lot of revenue coming in off the back of the resources boom and you can either invest it or spend it on consumption, which is what those opposite did year in, year out while there was no new investment in our hospitals, no new investment in our TAFEs and our universities, no new investment for major new national and global challenges like climate change, and not a single dollar spent on reclaiming water entitlements from the Murray-Darling Basin—none of these investments in the future. I would suggest to those opposite that what they need is an economic strategy for Australia’s future rather than simply continuing their past practices, which were reflected budget after budget and which were to take the revenue product of the resources boom and to expend it on consumption. This government has a strategy for the long-term future. We are proud of our investment funds for the future. We are a party and a government of nation-building and we are so without apology.