Penny Wong (SA, Australian Labor Party, Shadow Minister for Corporate Governance and Responsibility) Share this | Hansard source

At the last election, Middle Australia put their trust in John Howard on interest rates. And what have they got back since then? They have got back four successive rate increases. Today the Prime Minister got what he has been softening up the electorate for, with the rates rise he gave the green light to—his fourth consecutive interest rate rise since the last election, since the commitment was given to keep interest rates at record lows, and the eighth successive increase in interest rates since 2002, I think.

The reality is that Australians are more highly indebted than they ever have been, and the proportion of disposable income that families have to find to meet the interest payments on their mortgages is higher now than it ever was under Labor. Australian families understand what the new interest rate reality is, and there is no such thing as a small interest rate rise.

But unfortunately this government is too arrogant and too out of touch to understand this. We have a Treasurer who says that any interest rate below double figures is low. We saw Mr Turnbull, when commenting on the previous rate rise, trying to argue that that last rate rise was overdramatised. And then, today, here we have Senator Bernardi, who suggests that Labor’s criticism of the government’s economic management resulting in an interest rate increase was akin to the hole in a Krispy Kreme doughnut. I am sure the Australian families who are going to struggle with the ever-increasing cost of meeting their mortgage interest repayments arising out of eight successive interest rate increases think this is a little more important than a hole in a Krispy Kreme doughnut.

Let us have a little discussion about the sort of pressure that the government’s broken promise is placing on Middle Australia and the reasons behind the most recent interest rate increase, consistent with previous warnings from the Reserve Bank. It is probably useful to go to the governor’s statement, where he states:

Domestic demand has been expanding at a relatively strong pace against a background of limited spare capacity. Labour market conditions have remained tight and businesses are reporting high levels of capacity usage.

                 …         …         …

This combination of forces has contributed to an increase in inflation. In the September quarter the underlying inflation rate was … 3 per cent …

What are the factors which are contributing to inflation? If you read what the Reserve Bank has said both on this occasion and on previous occasions—warnings that the Howard government has simply failed to acknowledge and failed to act upon—it is quite clear that the Reserve Bank has been saying for some time that the supply side of the economy, the capacity constraints which exist and the fact that demand has grown so substantially have added to inflationary pressure. It is quite clear from what the Reserve Bank has said that we are looking at capacity constraints. This is putting pressure on inflation which, in turn, is putting pressure on interest rates.

But of course that is not what the Howard government say. They seek to blame anyone and everyone else when it comes to the inflationary pressures in the economy which, in turn, are putting pressure on interest rates. The reality is the Howard government are failing to manage inflation, and this is the primary reason we see interest rates going up for the fourth successive time since they promised to keep interest rates at record lows. What are some other things the government have ignored? The Howard government have been too short sighted to act appropriately on the skills crisis. They have failed to invest sufficiently in research and development and innovation and they have failed to invest in infrastructure.

I want to briefly comment on household debt levels, because the government does not seem to understand the reality that is facing Australian families. The reality is that mortgage interest repayments under John Howard are around nine per cent of disposable income. That is higher than they ever were under previous Labor governments, and families are using a greater proportion of their income on mortgage interest repayments than ever occurred under Labor. That is the reality. I tell you what else is the reality: we are more highly indebted than we ever have been. The average Australian household now owes $1.57 in debt for every $1 of disposable income they earn. The government can only talk for so long about the balance sheet and the growth in assets values to justify the ever-increasing proportion of disposable family income which is being spent on mortgage interest repayments.

Let us look at what the Prime Minister says. Do you see him saying, ‘I see that the Reserve Bank yet again has talked about capacity constraints, skills and the labour market being tight’? No. He says, ‘There is also upward pressure on interest rates now being exerted because some state governments are going into deficit.’ It is extraordinary. He is trying to blame Labor state governments. What is amazing about the government is that they are incredibly quick to take responsibility, to take credit, when there is not an interest rate increase but, if there is one, all of a sudden it is everybody else’s fault—it is the price of bananas, it is the price of petrol or ‘The state governments are doing this or doing that.’ I think Australians are going to become increasingly tired of the government’s willingness to take responsibility for the upside of being in government but their failure to take responsibility for the downside, which is when there are inflationary pressures resulting substantially, at least, from their failure to invest in productivity and the supply side of the economy, which people expect them to take responsibility for.

I want to briefly talk about investment in skills, and Senator Murray was right to identify that as a major problem. As I have previously said in this place, it is an extraordinary act of economic irresponsibility for the government to allow us as a country—the only OECD country, I think; certainly one of the few—to go backwards in terms of public investment in education and training over the last decade. According to the most recent figures, the average OECD increase in public investment in post-school education—that is, vocational and higher education—was a 48 per cent increase. What has Australia’s investment been during the term of this government? Minus seven per cent. That is the government’s contribution to skilling the Australian workforce, increasing productivity and ensuring that the economy on the supply side has the capacity to meet increasing demand.

Underinvestment is something that not just Labor but the Reserve Bank and business have been telling the government about for years. So, whilst the Prime Minister might want to continue to blame the states and to mislead the public about who sets interest rates and what impact they have, he fails to take responsibility for the fact that, under his government, there has been a massive underinvestment, in international terms, in post-school education. Also, the Productivity Commission has recently warned the Howard government against its narrow focus on the commercialisation of public research and called for a rethink of industry research and development incentives. We all know that innovation is critical to Australia’s ongoing economic prosperity. It delivers critical economic, social and environmental benefits. The Productivity Commission is echoing a range of concerns, which have been raised by others, about the government’s failure to have a coherent strategy on innovation and about the underinvestment in research and development.

I turn very briefly to infrastructure. Infrastructure has been identified as one of the factors contributing to capacity constraints in the economy on a number of occasions. Do we have national leadership from the Howard government when it comes to infrastructure? We do have national leadership, but do you know what it is for? It is for pork-barrelling. That is what the infrastructure leadership from the Howard government is for—National Party interest before the national interest and, frankly, that has to stop. There are a range of examples which demonstrate the government’s propensity to spend funds—which should be spent on productive infrastructure—on what can only be described as electoral pork-barrelling. For example, in the Liberal Party seat of Forde, the government spent over $5 million on a steam train that has not generated enough steam to boil an egg and, in the seat of Dobell, $1.5 million was spent to dredge the famous Tumbi Creek, which was already clearing itself. Meanwhile, again in the electorate of Forde, $370,000 a year could deliver Labor’s trade completion bonus, which is a plan to halve the current dropout rate of apprentices and produce an extra 46 qualified local tradespeople.

We know from the Business Council of Australia there is a substantial shortfall—$90 billion—in Australia’s infrastructure, and the response from the Howard government is to continue to pork-barrel. In the very short time I have allocated, I want to say one thing. We saw Senator Minchin today, again, refuse to take responsibility for this matter. In 2005, when there was not an interest rate increase, he put that down to the government’s record of economic management. I cannot recall the exact quote—‘great economic management’, ‘good economic management’ or something like that.

Including today, there have been eight successive interest rate increases—four since the last election. Do we see the government stepping up to take responsibility and recognising that their economic management has contributed to this? No, we do not. We see yet more blame-shifting and more finger-pointing—‘anybody but me’. They are happy to take the upside, they are happy to take the credit—but not the responsibility. (Time expired)