Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

strong growth, low inflation and low unemployment. Firstly, the Westpac consumer sentiment index for May reached an all-time record high of 123.9 compared with an historic average of just over 100. That index found that confidence jumped 18 per cent for people earning between $40,000 and $60,000 a year. Then last week we saw unemployment fall to a new 34-year low of just 4.2 per cent. Unemployment is now less than half the level prevailing when the Labor Party left office.

Last week the ABS released the March quarter national accounts, again confirming strong growth in our economy. Real GDP grew 1.6 per cent in the quarter, 3.8 per cent higher for the year, despite the continuation of the drought, which has seen farm production fall a massive 22 per cent in the past year. The strong growth figure was underpinned by strong private business investment, up 7.6 per cent just in the quarter. I am happy to confirm that these figures are affected somewhat by the historic full privatisation of Telstra, now finally regarded by the ABS as a private sector company. But even allowing for that useful and sensible reclassification, private investment was up 4.8 per cent in the quarter. Exports were up 4.7 per cent in real terms over the year. Business profitability rose again to be 13.9 per cent higher than a year ago, and it is now at record levels as a share of the economy. These strong profits are occurring right across the economy, not just in the resources industry—and of course that is great news for the approximately 50 per cent of Australians with direct or indirect exposure to the share market. We have also seen very strong growth in productivity. It was up 1.4 per cent in the December quarter and another 0.6 per cent in the March quarter, a total of two per cent in just six months. We expect that to continue as we reap the rewards of the very strong business investment that we have seen.

What is particularly great about this strong growth and now this low unemployment is that they have been achieved without inflation running away or a wages breakout as we used to see in this country. Of course that is only possible if you have a flexible, deregulated labour market. Mr Saul Eslake, the economist at the ANZ who is not a particular friend of this government in his critique, told ABC Radio National last week:

In days gone by under different industrial relations systems those pay increases have flowed through to other parts of the economy where they have not been justified and eventually lead to accelerating inflation and higher interest rates—

and he could have added ‘and higher unemployment’. He said:

That hasn’t happened on this occasion, and I think changes in the IR system have played a part in preventing those surging wages. I think it’s also true, to an extent that I must admit personally I’ve found a little surprising, the changes to the unfair dismissal laws appear to have prompted a marked acceleration in employment amongst small businesses, which in turn is another factor contributing to strong economic growth.

In other words, if the Labor Party were to implement its policy of bringing back the old unfair dismissal laws, allowing a return to pattern bargaining—which is clearly in their policy—and scrapping AWAs, we could not possibly keep inflation, unemployment and interest rates at the low levels at which they are now. Only a decade ago no-one believed you could get that happy trifecta of great economic outcomes. They will disappear if the Labor Party and the union movement get their way and jettison the very policies which have made these current economic outcomes possible.