Julian McGauran (Victoria, National Party) Share this | Hansard source

I will quote from the Financial Review, because it is important to do so. I do not wish to quote big slabs of it, but it is poignant. It is poignant because it goes to the fact that the issue goes deeper than what Mr Rudd has just flicked off in saying that ‘international volatility’ is causing this. No. Read the actual results of the surveys and you will realise it certainly goes deeper than that. It is in fact a comment on the ability of this government to run the economy. To quote certain paragraphs:

Consumer confidence has plunged to its lowest point in almost 15 years amid signs the economy is slowing under the weight of successive interest rate increases and the effects of global financial market turmoil.

…            …            …

The Westpac-Melbourne Institute index of consumer sentiment has plummeted more than 21 per cent in the past three months—

three months of the Rudd government, precisely—

to record its sharpest quarterly fall on record, a development that follows softer retail sales and signs that growth in employment, forward orders and profits are moderating.

Moreover:

… Westpac chief economist Bill Evans said the significance this time was that it came on top of similar sharp falls in the previous two months—

of the Rudd government. It continues:

The index measuring expectations about family finances over the next 12 months plunged by 8 per cent this month to be almost 15 per cent lower than in March last year, while optimism about prospects for the economy in the next year has collapsed, dropping by 33.3 per cent from a year ago …

The results are consistent with a Sensis survey of 1500 consumers reporting a 17 per cent plunge this month in the number expressing confidence in their financial prospects for the year ahead—a record fall for the survey …

As I say, that goes deeper than the subprime effect from the United States and the recession that they are tipping into. It is a survey result that really goes to the confidence in the new government’s ability to run the economy—and why wouldn’t consumers have lost confidence? In the words of the Financial Review, confidence has ‘plunged’, ‘plummeted’ and ‘drastically fallen’. Why wouldn’t it? Since those from the other side have taken up the privilege of government, they have done nothing but run down the economy.

The worst of all of this is the man who has been put in the position of responsibly running the economy, and that is the Treasurer, Mr Swan. I am sure that in everyone’s minds this is a drowning Treasurer. This is a job that is really quite beyond him. I think Senator Fifield compared him to another failed Treasurer, John Kerin, saying that he could well be heading the way of John Kerin. There is no doubt about it: the biggest task, to manage the economy—a responsibility that is probably greater than a Prime Minister’s in many ways, because he gets the initial response and draws up the initial briefs for cabinet—is in the hands of someone who cannot handle the job.

After all, to just flick this off as ‘international volatility’ does not explain why under our watch, when the Howard-Costello team were running the economy, we were able to ride out the Asian crisis in 1997 and 1998, the collapse in the Asian economy. There was also a similar US recession after September 11; the worst drought that this country has faced in 100 years; and the SARS crisis, where the tourist industry collapsed. All those crises buffeted the economy, but I can tell you consumer confidence, business confidence and business investment never slumped as low as they have in the past three months.

There is no doubt that the weakest link in your government is the ability of this Treasurer to manage the economy. His irresponsibility and his lack of knowledge of market expectations and market confidence are borne out by the comment that ‘the inflation genie is out of the bottle’. It ranks with the comment of another previous Labor Treasurer, Paul Keating, when he sent the market into a plunge by saying that Australia was in danger of becoming a banana republic. The worst thing about this is there is not one sensible government member, at least in the chamber, because they are all repeating the same comment. None of them have woken up to how it affects market expectations and confidence to say that the inflation genie is out of the bottle.

I have good reason to say that, because two very good sources—our own Reserve Bank governor and the equivalent in the United States, the US Federal Reserve chairman, Ben Bernanke—both give an outline of what drives future inflation rates. Our own Reserve Bank governor, Glenn Stevens, said on 11 December last year:

Even more important are expectations of future inflation. When people expect prices to rise rapidly, they bring forward purchases, put up their own prices, demand higher wages and so on. That helps to create the very inflation they expect.

To back up that comment about the nature of inflationary expectations, the chairman of the US Federal Reserve, Ben Bernanke, said:

Undoubtedly, the state of inflation expectations greatly influences actual inflation …

When you have the Treasurer of this country stepping out and saying the genie is out of the bottle, running down the economy and misrepresenting past inflationary levels, then what do you expect? You get 15-year slumps in consumer confidence and business confidence. That is the result of it. It goes way beyond the international volatility. Do not think you can just ride through a Financial Review headline and continue on as you are, running down the economy and using it for your own political advantage against the opposition. This will cascade through the economy. Don’t think that it won’t. Consumer confidence will cascade through the economy where you will start affecting the employment rate. Don’t think that you won’t. A very good Treasurer—the best Treasurer in this country, and the longest serving Treasurer in the world, Peter Costello—compared the economy with a Formula 1 racing car. It is finely tuned; it can go fast and smooth and take the corners, but if you make one drastic, sharp move—if you drive it badly; if you put a bad driver in there—you will tip that Formula 1 car up. That is what the economy is like. It is finely tuned. The market is a creature unto itself. A bad Treasurer that makes outlandish comments—just because he is driven by a political aim—will affect the economy, and that is what this Treasurer has done. He was left the legacy of a Formula 1 car and he is ramming it into the sides. He is going to do somersaults and spin out.

I know I am limited for time, but I cannot let the moment pass—having made those comments—without restating that the economy that the Labor Party were left, now that they have come into government, was described by no less than the OECD as ‘the wonder down under’. I saw it printed in the Economist: the ‘wonder down under’ economy. It is worth stating that when we first came into government in 1996 we were left with the legacy of a $96 billion debt—the highest debt run up by any government—and a $10 billion budget deficit. In contrast, when you came into government you were left with zero government debt—one of the few governments in the world that had the discipline and the foresight to reduce debt to zero. We had a string of surplus budgets, the last budget surplus being $18 billion. The economy had 11½ years of record growth, interest rates were always some five points less than the previous government’s highs and we had the significance of the unemployment figures. If I can just highlight one particular figure, it is the unemployment rate, which is our proudest legacy, because you do all this work so people can get a job and lift their living standards and leave a legacy for their family and their children. That is the whole aim. Every decision that you make funnels down to people being able to get a job. It is a pretty glib and easy thing to say—to give people the right and the opportunity to have a job. But it is hard to get to that point. We were fast reaching full employment. It is a proud legacy of the government, but it requires discipline and sound economic management to be able to open those opportunities up for Australian families. We left a legacy of record unemployment of 4.3 per cent.

In conclusion, I would appeal to those on the other side. I know you are in this chamber to make cut and thrust political points, but I appeal to those on the other side, for the sake—