Nick Sherry (Tasmania, Australian Labor Party, Minister for Superannuation and Corporate Law) Share this | Hansard source

and I will have some more to say, Senator Kemp, in detail about these associated issues in the coming months. There is an increasingly difficult global economic set of conditions that reinforce the Rudd Labor government’s determination to modernise our economy.

We also face strong domestic demand in our economy. We are facing capacity constraints, in large part because of the neglect of the former Liberal government, in areas such as infrastructure, education and training. Because of that neglect we are experiencing significant inflationary pressures. Inflation is our most pressing domestic challenge. The simple reality for those opposite is that they failed to appreciate the seriousness of the situation when they were in government. For the months of October, November and December underlying inflation for the year was running at 3.6 per cent. That is the highest in 16 years and well above the Reserve Bank’s band on which it is required to take action. We have seen an extended period of increase in underlying inflation and the new Rudd Labor government is not going to ignore this, unlike the now opposition who simply ignored 20 warnings from the Reserve Bank of Australia on inflation. We do know that higher inflation leads to upward pressure on interest rates. This hurts hard-working Australian families, it erodes living standards, it harms business and it threatens future growth and job creation.

Unfortunately, as I have already indicated, our predecessors lacked the foresight to deal with issues around infrastructure, education and training. I note that Senator Minchin, the new Liberal leader in the Senate and former Minister for Finance and Administration, has to bear some responsibility for the lack of fiscal discipline that was applied by the former Liberal government, particularly in the last year as it disintegrated.